We (Gauntlet) want to provide some needed context on our vote and messaging around it.
- We ran stress tests, and the current parameters for WBTC are pretty aggressive. Most of the risk of insolvency in the protocol comes from large WBTC positions:
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Net Value Insolvent measure the relative risk to the protocol from each asset pool. We pull live liquidity data from centralized and decentralized exchanges as well as the current collateral positions to ensure this value reflects the best available information.
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The Compound WBTC pool has many times more WBTC than other protocols, creating higher BTC risk in Compound. While Compound can increase its capital efficiency for borrowers of other assets, this current change increases the risk of overall protocol insolvency substantially.
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We made a mistake yesterday when casting our vote and are unable to change it. We’re building infrastructure now to ensure that future votes are always verified and cast as intended. We’ve voted without issue on almost every other proposal and are looking forward to completing tooling that makes sure this doesn’t happen again.
We’ll be making a new proposal soon with collateralFactors for each asset type that are supported by our stress tests that should increase the capital efficiency for less risky assets. Community proposals like this one are great see, and we want to support community-driven initiatives any time we can. It was a tough decision not to support his proposal, as supporting the community and increasing the capital efficiency of Compound are causes we are very much behind. We’d love to increase the WBTC collateralFactor but our analysis doesn’t justify this change.
More info on how our stress test models Compound and liquidation spirals can be found in our report.