Risk Parameter Updates 2021-10-25

Simple Summary

A proposal to adjust six (6) total parameters across six (6) Compound assets.

Abstract

This proposal is a batch update of risk parameters to align with the Moderate risk level chosen by the Compound community. These parameter updates are the first of Gauntlet’s regular parameter recommendations as part of Dynamic Risk Parameters.

Motivation

This set of parameter updates seeks to take the first step in level setting assets to a Moderate risk level of the protocol while making risk trade-offs between specific assets. Note that some are different from the original risk level consensus check as market conditions have changed.

Specification

Parameter Current Value Recommended Value
AAVE Collateral Factor 50% 60%
LINK Collateral Factor 50% 60%
MKR Collateral Factor 35% 45%
SUSHI Collateral Factor 40% 45%
USDC Collateral Factor 75% 80%
YFI Collateral Factor 35% 55%

The suppliers of these assets can borrow more against their collateral and still keep the protocol safe. See below volatility and exchange volume data from 10/25 that were important drivers for the updated parameter recommendations.

Symbol Volatility Collateral Supply (USD) Average Daily Volume (USD)
AAVE 1.29 6000000 130000000
LINK 0.95 185000000 643000000
MKR 1.04 1050000 77400000
SUSHI 1.20 700000 182000000
USDC 0.073 2950000000 2580000000
YFI 0.86 715000 82000000

Next Steps

  • Initiate a governance proposal following general consensus in this thread.

Should six (6) total parameters across six (6) assets be changed?
  • For
  • Against
  • Abstain

0 voters

7 Likes

I think the most important risk factor is not just collateral factor, but liquidation factor is really important, I think when compoundfinance reaches 2% liquidation factor, means assets get liquidated when the collateral value based on market price is 2% more than value of taken loan.
I don’t know how we can achieve that or what kind of changes we need, but I know its a very beautiful thing that will eliminate the risk completely and for a high volume protocol like compound it will work.
thank you.

1 Like