[Gauntlet] ETHx Initial Parameter Recommendations: Ethereum v3 WETH Comet (11/3/23)
Simple Summary
Gauntlet recommends the following parameters for listing ETHx on the Ethereum Compound v3 WETH comet.
| Parameter | Value |
|---|---|
| Collateral Factor | 90% |
| Liquidation Factor | 93% |
| Liquidation Penalty | 2.5% |
| Supply Cap | 5,000 ($9M) |
Analysis
ETHx has a circulating supply of 37k, with a market cap of $68M. As seen below, 5k ETHx can currently be swapped for WETH at 7.79% slippage.
Sufficient DEX liquidity for LSTs in USDC comets is very important since liquidators have to quickly swap the LST into USDC with minimal slippage to realize an arbitrage. However, in the WETH comet, a liquidator can purchase ETHx using WETH and then unstake ETHx at a later date to realize the arbitrage, assuming no breaches in the LST’s smart contract.
The larger concern for low DEX liquidity may instead be price manipulation risk, depending on the type of ETHx price oracle Compound uses.
To start conservatively, we recommend setting an initial supply cap of $9M, with the standard WETH comet LST collateral asset parameters.
| Parameter | Value |
|---|---|
| Collateral Factor | 90% |
| Liquidation Factor | 93% |
| Liquidation Penalty | 2.5% |
| Supply Cap | 5,000 ($9M) |
Next Steps
- We welcome community feedback