Gauntlet Recommends to adjust the Store Front Price Factor for both WETH Comets on BASE and Ethereum:
- Decrease BASE WETH’s Store Front Price Factor from 100% to 70%.
- Decrease Ethereum WETH’s Store Front Price Factor from 100% to 70%.
Analysis
The Store Front Price Factor sets the fraction of the liquidation penalty that goes to buyers of collateral instead of the protocol. This factor is used to calculate the discount rate of collateral for sale as part of the account absorption process.
As shown in the diagram below, the adjustment of the Store Front Price Factor to 70% will allow the protocol to increase reserve generation in the event of liquidation by 30% of the liquidation penalty amount.
In the WETH Comets, where the liquidation penalty is 3% for all collateral assets, the recommended 70% Store Front Price Factor will incentivize liquidators to liquidate positions safely, with 2.1% of absorbed collateral being discounted toward liquidators.
Next Steps
- Target on-chain vote