Simple Summary
If the community wishes to launch the Base v3 USDS comet, Gauntlet recommends the below risk parameters:
Risk Parameters
| Asset | Collateral Factor | Liquidation Factor | Liquidation Penalty | Supply Cap |
|---|---|---|---|---|
| sUSDS | 93% | 95% | 4% | 25,000,000 sUSDS |
Rationale
USDS has been witnessing growing TVL on Base chain with over $200M bridged - 100M in USDS and 97M in sUSDS.
Supply Caps and Liquidation Penalty
USDS DEX TVL
| Pool Type | Pool Name | Pool TVL (USD) | 24H Volume (USD) | URL |
|---|---|---|---|---|
| Aerodrome Slipstream | USDS / USDC 0.01% | $1.38M | $296,817.52 | Link |
| Aerodrome Slipstream | USDS / WETH 0.05% | $0.00 | $1,475.19 | Link |
| Total TVL: $1.38M |
Reviewing the liquidity pathways from the proposed collateral assets sUSDS to USDS, Gauntlet recommends only onboarding sUSDS as collateral asset for the time being due to no/poor liquidity pathways to other assets. We recommend aligning the liquidation penalty of sUSDS to that of sUSDe on the Mantle comet.
| Asset | Liquidation Penalty |
|---|---|
| sUSDS | 4% |
Gauntlet recommends setting the supply caps to the following:
| Asset | Supply Cap |
|---|---|
| sUSDS | 25,000,000 |
Collateral Factors (CF) and Liquidation Factors (LF)
We recommends adjusting the CF and LFs with respect to the recommended Liquidation Penalties (LP). The recommended values are as follows
| Asset | Collateral Factor | Liquidation Factor |
|---|---|---|
| sUSDS | 93% | 95% |
Storefront price factor: 60%
Targetted Reserves: 20M
Seed Reserves: 100,000 USDS
IR Curve Parameters
We recommend aligning the IR parameters to those of stablecoin comets :
| Parameter | Current Value | Recommended Value |
|---|---|---|
| Annual Borrow Interest Rate Base | 0.015 | 0.015 |
| Annual Borrow Interest Rate Slope Low | 0.0333 | 0.05 |
| Borrow Kink | 0.9 | 0.9 |
| Annual Borrow Interest Rate Slope High | 4 | 3.4 |
| Annual Supply Interest Rate Base | 0 | 0 |
| Annual Supply Interest Rate Slope Low | 0.039 | 0.054 |
| Supply Kink | 0.9 | 0.9 |
| Annual Supply Interest Rate Slope High | 3.6 | 3.034 |
Utilization vs APRs & Reserve Factor
At 90% kink, the Borrow APR is 6% and Supply APR is 4.86%, the comet will have positive reserve growth when the utilization is >72%
Incentive Parameters
Our COMP rewards recommendations are designed to offer appealing distribution APRs when the comets are first launched and when supply caps are highly utilized.
Gauntlet is recommending supply rewards to incentivize a more significant inflow of supply tokens into the protocol. This is important in the early stages of protocol growth before borrowers can join. Daily COMP rewards are subject to change as TVL rises and the markets evolve.
| Daily COMP Supply Rewards | Daily COMP Borrow Rewards |
|---|---|
| 24 | 12 |
With the above utilization and the present Interest Rate curve:
- Supply APR: 4.86%
- Borrow APR: 6.00%
Given the current COMP price of $77 at 90% utilization:
- Supply Distribution APR: 5.34%
- Borrow Distribution APR: 2.96%
This results in the following Net APRs:
- Net Supply APR: 10.20%
- Net Borrow APR: 3.04%
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