Simple Summary
For Phase 10 of the v2 deprecation, Gauntlet recommends the following borrow cap adjustments:
| Symbol | Current Borrow Cap | Current Borrow Cap USD | Recommended Borrow Cap | Recommended Borrow Cap USD |
|---|---|---|---|---|
| DAI | - | - | 80,000,000 | $80 M |
| UNI * | 700,000 | $7.379 M | 25,000 | $0.264 M |
| TUSD | - | - | 650,000 | $0.650 M |
| USDC | - | - | 100,000,000 | $100 M |
| COMP * | 18,000 | $1.439 M | 2,500 | $0.200 M |
| ETH | 100,000 | $322.464 M | 10,000 | $32 M |
| USDP | - | - | 3,000,000 | $3 M |
| LINK * | 125,000 | $2.362 M | 9,000 | $0.170 M |
| USDT | - | - | 180,000,000 | $180 M |
- indicates supply for this asset is paused
Gauntlet recommends an incremental increase to reserve factors for the following assets:
| Symbol | Current Reserve Factor | Recommended Reserve Factor |
|---|---|---|
| COMP | 25.00% | 50.00% |
| MKR | 25.00% | 50.00% |
| ZRX | 25.00% | 50.00% |
| YFI | 25.00% | 50.00% |
| BAT | 25.00% | 50.00% |
| AAVE | 25.00% | 50.00% |
| UNI | 25.00% | 50.00% |
| LINK | 25.00% | 50.00% |
| SUSHI | 25.00% | 50.00% |
| USDC | 60% | 70% |
Analysis
These proposals are in line with the community’s preferences to deprecate v2 excluding both USDT & DAI. Based on the community’s preferences, we have prioritized deprecation measures that would not impact UX of users who supply or borrow DAI and USDT, until those comets are launched on v3. As a result, the deprecation measures had mild borrow caps for v2 assets, noting that total borrows for tail assets whose supplies are frozen are capped at the minimum of their borrow cap and current supply. Allowing users at least some ability to borrow these assets would help avoid abruptly driving certain users away from v2, which could have had second-order effects on DAI/USDT suppliers/borrowers that we aimed to keep in the protocol, while still allowing v2 to accumulate reserves in a manner not supported by v3.
Given V3 growth and the upcoming launch of the USDT, the community may wish to pursue more aggressive deprecation strategies for v2 including reducing borrow caps, in order to further mitigate risk and effectively reduce new borrows in order to fully deprecate v2 as more v3 comets are preparing to launch.
Table of Effective Borrow Cap (USD) vs Recommended Borrow Caps
| Symbol | Current Borrow Cap | Current Borrow Cap USD | Current Supply USD | Effective Borrow Cap | Recommended Borrow Cap USD | Effective Borrow Capacity Change ($) |
|---|---|---|---|---|---|---|
| DAI | - | - | $80.445 M | $80.445 M | $79.945 M | -$499,492 |
| UNI | 700,000 | $7.379 M | $21.791 M | $7.379 M | $0.264 M | -$7,115,850 |
| TUSD | - | - | $0.786 M | $0.786 M | $0.650 M | -$136,480 |
| USDC | - | - | $94.872 M | $94.872 M | $100.000 M | $0 |
| COMP | 18,000 | $1.439 M | $3.374 M | $1.439 M | $0.200 M | -$1,238,778 |
| ETH | 100,000 | $322.464 M | $450.673 M | $322.464 M | $32.246 M | -$290,217,508 |
| USDP | - | - | $5.020 M | $5.020 M | $3.000 M | -$2,020,000 |
| USDT | - | - | $177.755 M | $177.755 M | $180.000 M | $0 |
The recommendation provided delineates borrow limits in USD and presents the Effective Borrow Cap as determined by the max between the asset’s supply or borrow cap.
As the adoption of Ethereum USDC Comet gains momentum, per the community’s preference, we are committed to offering ongoing guidance for transitioning USDC positions to v3 market. Since February 1st, the USDC liquidity pool (LP) has been generating an impressive average of $17k in daily reserves, leading to a projected annual reserve accumulation of $6.2 million. In light of this reserve generation, the community may wish to pursue increasing the reserve factor by 10% to further encourage migrations to Comet versions. Additionally, upon the launch of the Ethereum USDT Comet, the community can discuss strategies to migrate USDT v2 users to v3.
Next Steps
We welcome community feedback and target on-chain proposal on 3/4/2024.