Simple Summary
Gauntlet recommends updating the risk parameters and interest rate curve for the Base USDbC comet to expedite its deprecation.
Risk Recommendations
| Asset | Parameter | Current Value | Recommended Value |
|---|---|---|---|
| WETH | Supply Cap | 1100 | 0 |
| Collateral Factor | 69% | 45% | |
| Liquidation Factor | 74% | 64% | |
| Liquidation Penalty | 5% | 15% | |
| cbETH | Supply Cap | 350 | 0 |
| Collateral Factor | 65% | 45% | |
| Liquidation Factor | 70% | 60% | |
| Liquidation Penalty | 15% | 20% |
Interest Rate Curve Recommendations
| Parameter | Current Value | Recommended Value |
|---|---|---|
| Annual Borrow Interest Rate Base | 0.025 | 0.05 |
| Annual Borrow Interest Rate Slope Low | 0.045 | 0.035294 |
| Borrow Kink | 0.9 | 0.85 |
| Annual Borrow Interest Rate Slope High | 6.0 | 3.466667 |
| Annual Supply Interest Rate Base | 0.0 | 0.0 |
| Annual Supply Interest Rate Slope Low | 0.025 | 0.02 |
| Supply Kink | 0.9 | 0.85 |
| Annual Supply Interest Rate Slope High | 4.3 | 0.886667 |
Analysis
Risk Recommendations
- Supply Cap Reduction: Setting supply caps to 0 prevents new suppliers from entering the market.
- Collateral and Liquidation Factor Reductions: These adjustments reduce capital efficiency, making the market less appealing without causing users to become liquidatable.
- Increased Liquidation Penalty: Raising penalties further disincentivizes usage by increasing the cost of liquidation, while reducing risk to the comet.
Interest Rate Curve Recommendations
The proposed updates include:
- Reducing the kink from 90% to 85%.
- Increasing reserve growth at the kink from 60% to 75%, while ensuring more stable reserve growth across all utilization levels.
These changes aim to disincentivize TVL inflows and accelerate the market’s deprecation.