[Gauntlet] Introduction of Metrics Tracking Lending Efficiency for Compound V3 Comets (2024/04/05)

Summary

Gauntlet is sharing this analysis on users who have placed collateral in Compound V3 comets but have not taken out any loans. Given that the funds from non-borrowing depositors contribute to the collateral supply caps without being actively used, this results in lower capital efficiency for the protocol. As a result, Gauntlet will be adding the following metrics to better assess the efficiency of the lending market in Compound V3 comets:

  • Non-borrowing Depositor Ratio: This metric measures the proportion of depositors who have not borrowed against their deposits compared to the total number of depositors.
  • Non-borrowing Depositors’ Fund Ratio: This metric calculates the share of collateral provided by non-borrowing depositors in relation to the total collateral pool.

Gauntlet categorizes non-borrowing depositors as users who have deposited collateral of at least $10 but have borrowing amounts less than $1.

Motivation

Gauntlet wants to better understand large user positions who only deposit without borrowing within a Comet. Within the example table below, this large depositor within the Ethereum USDC comet has a deposit of $5.5 million in WBTC, $0.89 million in WETH, and $22K in COMP, without borrowing any USDC. We want to better monitor these positions to better optimize for growth and risk within the protocol.

address protocol collateral total_borrow ($) total_supply ($)
0xe4739a2423433e7bac9ba7ea5c4314de86a60142 compound_v3_ethereum_usdc wbtc 0.0 5.5M
0xe4739a2423433e7bac9ba7ea5c4314de86a60142 compound_v3_ethereum_usdc weth 0.0 0.89M
0xe4739a2423433e7bac9ba7ea5c4314de86a60142 compound_v3_ethereum_usdc comp 0.0 22K

Analysis

Non-borrowing Depositor Ratio
Our estimation suggests that approximately 30% of depositors do not engage in borrowing. This percentage varies across different markets, as detailed below, with highest ratio on Base WETH and lowest on Arbitrum USDC comet.

comet Non-borrowing Depositors Ratio
compound_v3_arbitrum_usdc 9.98%
compound_v3_polygon_usdc 29.51%
compound_v3_arbitrum_usdce 32.21%
compound_v3_base_usdbc 33.90%
compound_v3_ethereum_weth 39.53%
compound_v3_ethereum_usdc 48.13%
compound_v3_base_weth 60.15%

We acknowledge that the majority of non-borrowing depositors are small retail users, with their median deposit amount being approximately $50. Nonetheless, deposits can reach up to ~$8 million. The table below outlines the distribution of deposit amounts for non-borrowing depositors.

Metric Value
mean $15,837.0
std $285,951.0
min $10.0
25% $22.0
50% $49.0
75% $337.0
max $8,547,082.0

Non-borrowing Depositors’ Fund Ratio
Although the proportion of non-borrowing depositors is high, it’s estimated that their contributions constitute only about 1% of the total collateral in the Compound III market. This ratio varies significantly across different comets, with the Arbitrum USDC.e comet showing the highest proportion (around 5%) and the Arbitrum USDC comet having the lowest (less than 1%). The following breakdown provides details as of March 18. It’s anticipated that these figures will change over time.

Comet Non-borrowing Depositors’ Fund Ratio
compound_v3_arbitrum_usdc 0.34%
compound_v3_base_weth 0.47%
compound_v3_polygon_usdc 0.51%
compound_v3_ethereum_weth 0.73%
compound_v3_base_usdbc 1.45%
compound_v3_ethereum_usdc 1.54%
compound_v3_arbitrum_usdce 5.22%

To gauge the potential influence of non-borrowing depositors, we project the annualized reserves that might arise from their current positions. This projection is based on the assumption that these depositors would choose to borrow against their collateral at the average utilization rate, using today’s interest rates and the weighted average reserve factor. We aim to determine the amount of reserves that could be generated from their non-borrowing positions under these conditions.

Considering the present negative reserve factor, the anticipated annualized reserves from non-borrowing depositors’ positions within the Base WETH comet are negative. Among all comets, Ethereum USDC exhibits the highest “foregone annualized reserves” due to its considerable market size.

Comet Hypothetical Annualized Reserve Contributions ($) From non-borrowing depositors
compound_v3_ethereum_weth 1912.0
compound_v3_polygon_usdc 2330.0
compound_v3_arbitrum_usdce 3809.0
compound_v3_arbitrum_usdc 5317.0
compound_v3_base_usdbc 6114.0
compound_v3_ethereum_usdc 125509.0

Metrics Introduced

  • Non-borrowing Depositor Ratio:the ratio of non-borrowing depositors to all depositors
  • Non-borrowing Depositors’ Fund Ratio:the ratio of collaterals from non-borrowing depositors to all collateral funds

Next Steps

We will begin to include the Non-borrowing Depositor Ratio and Non-borrowing Depositors’ Fund Ratio in our weekly updates and provide further recommendations as needed.

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