With apologies for the belated reflection on this proposal, I think the protocol should take a wait-and-see approach to assess the validity of Gauntlet’s assumptions about the risk profile of the recently passed proposal to list wUSDM as collateral on the Optimism USDC market.
wUSDM carries a wider diversity of risks than most collateral assets, as articulated in Gauntlet’s prior analysis. Although USDM can be freely wrapped and unwrapped in the event of a liquidity crunch, I am concerned about listing assets as collateral when the asset’s supply cap at the time of listing exceeds the value of the underlying asset locked in the wrapper contract. In a crisis situation, it seems conceivable to me that the gas costs of wrapping/unwrapping USDM could exceed the incentives the protocol offers to prevent bad debt.
Gauntlet’s recommendations for wUSDM on Optimism explicitly assume that the market’s creation would trigger an increase in the wUSDM circulating supply on Optimism. It is too early to tell if this will happen, but early signs suggest it won’t be immediate. I believe it is in the protocol’s best interests to monitor the performance of the wUSDM market on Optimism, specifically, to watch for whether available wUSDM catches up to the imposed supply cap for wUSDM on the USDC Optimism market, before moving forward with this proposal.
Again I regret the belated feedback and appreciate everyone’s effort in moving this forward, but I think we need to either see more growth of wUSDM on these chains or a further reduction of the supply caps before I would be comfortable expanding its presence as collateral to Comets on mainnet and Arbitrum.