A proposal to adjust fourteen (14) risk parameters (borrow caps) for fourteen (14) Compound V2 assets.
Gauntlet’s simulation engine has ingested the latest market and liquidity data. These recommendations are Gauntlet’s regular parameter recommendations as part of Dynamic Risk Parameters.
This set of parameter updates seeks to maintain the overall risk tolerance of the protocol while making risk trade-offs between specific assets. Gauntlet has published a blog post on our parameter recommendation methodology to provide more context to the community.
Our parameter recommendations are driven by an optimization function that balances 3 core metrics: insolvencies, liquidations, and borrow usage. Our parameter recommendations seek to optimize for this objective function. Gauntlet’s agent-based simulations use a wide array of varied input data that changes on a daily basis (including but not limited to user positions, asset volatility, asset correlation, asset collateral usage, DEX/CEX liquidity, trading volume, expected market impact of trades, liquidator behavior). Our simulations tease out complex relationships between these inputs that cannot be simply expressed as heuristics. As such, the charts and tables shown below may help understand why some of the param recs have been made but should not be taken as the only reason for recommendation. Our individual collateral pages on the dashboard cover other key statistics and outputs from our simulations that can help with understanding other interesting inputs and results related to our simulations.
Top 30 borrowers’ aggregate positions & borrow usages
Top 30 borrowers’ entire supply
Top 30 borrowers’ entire borrows
|Parameter||Current Value||Recommended Value|
|USDC Borrow Cap||No Limit||500,000,000|
|DAI Borrow Cap||No Limit||400,000,000|
|USDT Borrow Cap||No Limit||300,000,000|
|TUSD Borrow Cap||No Limit||10,000,000|
|ETH Borrow Cap||100,000||No Change|
|WBTC Borrow Cap||No Limit||1,250|
|BAT Borrow Cap||No Limit||900,000|
|UNI Borrow Cap||11,250,000||550,000|
|COMP Borrow Cap||150,000||18,000|
|LINK Borrow Cap||No Limit||45,000|
|SUSHI Borrow Cap||No Limit||750,000|
|ZRX Borrow Cap||No Limit||1,000,000|
|AAVE Borrow Cap||66,000||12,000|
|YFI Borrow Cap||1,500||20|
|MKR Borrow Cap||5,000||300|
Setting borrow caps help avoid high-risk attack vectors while sacrificing little capital efficiency and allowing for a threshold of organic borrow demand. Additionally, these conservative borrow caps still would not have prevented users from borrowing based on organic user borrow behavior in the past month. Given that the vast majority of borrows on Compound (> 96%) are consistently stablecoins, Gauntlet recommends setting borrow caps for these non-stablecoin assets given the risk/revenue tradeoffs. As organic demand for borrowing grows, the community can reassess borrow caps and raise accordingly depending on the market risk considerations.
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Gauntlet launched an insolvency refund for Compound that contains a portion of our payment stream that can be clawed back in the event of insolvencies due to market risk. Since our last recommendation there have been no new insolvencies in Compound, Gauntlet’s Insolvency Refund vault is still live and can be seen here 0x7667095Caa12b79fCa489ff6E2198Ca01fDAe057