The discussion began with ChaosLabs introducing a new risk parameter in AAVE V3, the supply and borrow caps, and proposing a transparent methodology for setting these caps¹. The methodology takes into account factors such as the optimal utilization rate, the current supply of the asset, and the supply cap of the asset. Ghostlyenergy responded positively to the methodology, suggesting that the liquidity of the asset and its trading pairs could also be considered in the future².

Several community members engaged in the discussion, with GCao from Blockchain at Michigan questioning the parameters used in the methodology³. ChaosLabs clarified that these parameters were chosen as initial buffers to ensure sufficient liquidity and allow for additional borrowing⁴. Miguelmtz emphasized the need for a community-agreed framework for setting supply and borrow caps, suggesting that the borrow cap should be based on factors such as market liquidity, contracts risks, asset maturity, and bridges risk⁵.

The discussion also touched on the application of the borrow cap in current markets. Benjamin918 asked about potential follow-up proposals to adjust current markets, and ChaosLabs confirmed that they are constantly monitoring the markets and will propose amendments to the caps as needed^6,7. Jkrivine from Mangrove expressed concerns about the inconsistent use of the borrow cap, suggesting that a cap preventing AAVE insolvency within the block would prevent potential attacks⁸.

In conclusion, the community is actively discussing the proposed methodology for setting supply and borrow caps in AAVE V3. There is a general consensus on the need for a transparent and consistent methodology, but the specifics are still being debated. The discussion is ongoing, with the community providing valuable feedback and suggestions for improvement.