[Gauntlet] Polygon USDC.e - Risk and Incentive Recommendations (06/18/24)

Simply Summary

Gauntlet recommends the following adjustments to risk parameters:

  • Decrease WBTC Supply Cap from 1500 WBTC to 750 WBTC
  • Decrease WETH Supply Cap from 20000 WETH to 2500 WETH
  • Decrease WMATIC Supply Cap from 20M to 8M WMATIC
  • Decrease MaticX Supply Cap from 6M to 2M MaticX
  • Decrease Daily Comp Supply Rewards from 16 COMP to 8
  • Decrease Daily Comp Borrow Rewards from 7 COMP to 3

Analysis

Cap Recommendation

The supply caps on the USDC.e comet are being under-utilized for sustained periods and are generally trending downwards.

Gauntlet recommmends reducing caps for the assets mentioned above to adjust for utilization. Should caps breach the 75% threshold, Gauntlet will proactively adjust caps based on market conditions. The current changes in Supply caps will not deviate caps to above the 75% threshold.

Comp Rewards Recommendation

In relation to incentive cost per USDC.e balances, we have seen incentive costs double for borrows and increase by 75% for supplies compared to historical performance. Given the maturity of the comet and the outlfows of supply/borrow balances, Gauntlet recommends lowering further incentives from the USDC.e Comet.

Gauntlet recommends reducing Supply Rewards to 8 COMP and Borrow Rewards to 3 COMP. This will bring the Net Supply APR at kink to 7.7% and the Net Borrow APR at kink to 8.5%.

The protocol turns a Daily Net Profit at 78% utilization, with Daily USDC Reserve Growth at 73%.

Next Steps

  • Submit On-chain proposal on Jun 24th

Proposal 272 Review

OpenZeppelin confirmed that Proposal 272 is expected to execute as intended and updates the supply caps and reward rates as described in the forum post and proposal description.

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