Chaos Labs Updated Supply and Borrow Cap Methodology

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ChaosLabs has proposed a new supply and borrow cap methodology for Aave V3 assets, designed to be more robust and future-proof. The new methodology involves a detailed evaluation of the ExtremeProfitableLiquidationRatio for supply caps and allows utilization beyond the UOptimal point for borrow caps, with a proactive approach to ensure the assets remain adaptable to future needs.

In the ongoing discussions about Aave V3 assets, ChaosLabs has put forward a proposal for a more robust supply and borrow cap methodology. This new approach is being designed with future needs in mind and is expected to be finalized in the coming weeks. In the interim, the current methodology has been updated to address immediate needs, leading to an increase in supply and borrow caps across most assets where the cap is nearing full usage1.

The proposed supply cap methodology involves a detailed evaluation of the ExtremeProfitableLiquidationRatio. This ratio represents the number of times the ExtremeLiquidationAmount can be profitably liquidated all at once. The recommended supply cap is then calculated as the minimum of the ExtremeProfitableLiquidationRatio and 2, multiplied by the current supply cap. To prevent over-concentration of a token’s on-chain liquidity on Aave, the methodology includes provisions and recommends a waiting period of at least two weeks between consecutive recommendations for a single asset1.

In terms of borrow caps, ChaosLabs has suggested a setup that allows utilization beyond the UOptimal point, even when the supply cap is at full utilization. However, for higher UOptimal values, a different approach is required. The recommendation is to set new proposed borrow caps up to 0.55 * SupplyCap until the new methodology is published1. Moving forward, the updated Chaos Labs Supply Cap Methodology will be used for future recommendations2. This ongoing discussion and the proposed changes signify a proactive approach to managing Aave V3 assets, ensuring they remain robust and adaptable to future needs.

Posted 10 months ago

Last reply 8 months ago

Summary updated 2 months ago

Last updated 09/12 13:52