Gauntlet recommends the following supply cap adjustments to the protocol:
Supply Cap Recommendations
Status
Comet
Asset
Supply Cap
Current
Ethereum USDC
deUSD
8,000,000
Proposed
Ethereum USDC
deUSD
0
Current
Ethereum USDC
sdeUSD
5,000,000
Proposed
Ethereum USDC
sdeUSD
0
Current
Ethereum USDT
deUSD
8,000,000
Proposed
Ethereum USDT
deUSD
0
Current
Ethereum USDT
sdeUSD
5,000,000
Proposed
Ethereum USDT
sdeUSD
0
Current
Ethereum USDS
deUSD
8,000,000
Proposed
Ethereum USDS
deUSD
0
Current
Ethereum USDS
sdeUSD
5,000,000
Proposed
Ethereum USDS
sdeUSD
0
Rationale
We’ve observed some recent concerns regarding the backing of deUSD. As a precautionary measure, we propose temporarily setting the supply caps for both deUSD and sdeUSD to 0. We are monitoring the situation and will change risk parameters post our analysis.
Next Steps
Monitor the situation around deUSD/sdeUSD and adjust supply caps as warranted
The supply is already maxed out. So this changes nothing to the heightened risks for Compound.
Gauntlet needs to update risk profile for deUSD/sdeUSD by lowering CF,LF and hiking LP ASAP.
Disagree, there’s not actual fud with Elixir - the supposed “fud” exists around stream. A few independent parties have already verified Stream is fully backed, and they’re posting their proof of reserves. Elixir posted about this a month ago. Caps shouldn’t even be set to zero unless it comes out that Stream is unbacked (which has not happened).
[Gauntlet] Liquidation Penalty Recommendations for deUSD & sdeUSD
Simple Summary
Gauntlet recommends the following liquidation penalty adjustments to the protocol:
Risk Parameter Recommendations
Status
Comet
Asset
Liquidation Penalty(LP)
Current
Ethereum USDC
deUSD
4%
Proposed
Ethereum USDC
deUSD
8%
Current
Ethereum USDC
sdeUSD
4%
Proposed
Ethereum USDC
sdeUSD
8%
Current
Ethereum USDT
deUSD
4%
Proposed
Ethereum USDT
deUSD
8%
Current
Ethereum USDT
sdeUSD
4%
Proposed
Ethereum USDT
sdeUSD
8%
Current
Ethereum USDS
deUSD
6%
Proposed
Ethereum USDS
deUSD
8%
Current
Ethereum USDS
sdeUSD
6%
Proposed
Ethereum USDS
sdeUSD
8%
Rationale
While increasing the Liquidation Penalty (LP) may appear to reduce protocol risk, the relationship is not always straightforward. As discussed in Gauntlet’s original Compound V2 Risk Report, higher LPs can, in certain cases, lead to reduced liquidation efficiency, increased borrower insolvencies, or wider auction spreads, depending on market liquidity conditions. Therefore, LP changes must be considered in context rather than assumed to uniformly improve risk posture.
In this specific case, after reviewing market dynamics and the assets’ current liquidity conditions, Gauntlet recommends increasing the Liquidation Penalty for deUSD and sdeUSD across the Ethereum USDC, Ethereum USDT, and Ethereum USDS Comets. This adjustment aims to better align liquidation incentives and safeguard protocol solvency under stressed market conditions.