The discussion revolved around a proposal by Gauntlet to modify the AIP-306, specifically to reduce the WETH Uopt from 90% to 80% or 85% due to potential risks associated with 100% WETH utilization during periods of high volatility. Gauntlet provided a comprehensive analysis comparing the riskiest WETH collateralized positions with the riskiest USDC collateralized positions, demonstrating the potential excess risk involved with a 90% WETH Uopt¹. However, MarcZeller disagreed, arguing that the current Uoptimal has been optimized for growth and competitiveness, and that the risk-reward balance favors maintaining the status quo².

Gauntlet further emphasized their point by highlighting the potential risks associated with 100% WETH utilization during sudden market shocks, comparing it with the less risky scenario of USDC at 90% Uopt³. They also initiated a snapshot for the WETH Uopt updates, announcing that voting would commence in a day and last for three days⁴. Gauntlet's detailed analysis of the potential impact of a 30% drop in WETH price on the loan-book revealed that with a 90% Uopt, the bad debt would be around $900k, with 85% Uopt it would be around $500k, and with 80% Uopt there would be no bad debt due to lack of liquidation capacity⁵.

Michigan_Blockchain raised questions about the impact of volatility on WETH utilization and the speed of debt repayment, and also questioned whether the proposal to decrease WETH slope 1 to 3.3% would be offset by the proposal discussed in the previous post⁶. Despite Gauntlet's recommendation and analysis, they decided not to proceed with the proposal to return WETH Uopt to 80% in response to the community's preference⁷. This decision marks the conclusion of the discussion, with the community opting to maintain the current WETH Uopt at 90%.