Chaos Labs - Isolated Instance Parameter Updates - 07/17/25

Venus Governance Venus - Governance Proposals
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Overview

Chaos Labs provides an update to parameters on the BNB Chain Liquid Staked ETH pool designed to improve the user experience while facilitating deprecation of the pool.

Liquid Staked ETH (BNB Chain)

Chaos Labs’ previous post Deprecation Plan for Low-Activity Markets recommended deprecating the Liquid Staked ETH pool on BNB Chain because of low activity. This included setting the LTV of all assets in the pool to 0%, eliminating the ability for users who had already deposited to increase debt against their positions. While this is a common step in deprecations, it can also pose challenges for users who are employing leveraged yield generating strategies, as LTV set to 0% ensures that users can only take actions which lower their LTV, preventing them from withdrawing any collateral when a borrow position is open, and are not able to utilize flash loans to close a position in one transaction. This may be a factor in why the market has not shown significant outflows since the pool was frozen after the vote passed on May 29.

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The spike in ETH borrows came on May 28 from a user who has not been active on Venus BNB Chain markets since, and who currently maintains a health score of 1.36 using wstETH as collateral for ETH. This user manually leveraged wstETH over the course of numerous transactions, suggesting they are not technically proficient enough to utilize flash loans to close their position.

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To help ease the process of deprecation for users while also ensuring that the market remains on a path to closure, we recommend increasing LTV to 5% for weETH and wstETH (there are no borrows against ETH collateral), while setting all supply and borrow caps slightly above their current utilization to prevent growth in any of the markets.

Recommendation

Market Asset Current Supply Cap Rec. Supply Cap Current Borrow Cap Rec. Borrow Cap Current LTV Rec. LTV
BNB Liquid Staked ETH ETH 3,600 18 3,250 10 0% -
BNB Liquid Staked ETH wstETH 3,200 10.75 320 0 0% 5%
BNB Liquid Staked ETH weETH 120 4 60 0 0% 5%

Disclaimer

Chaos Labs has not been compensated by any third party for publishing this recommendation.

4 Likes
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It’s clear that user asset safety remains a top priority throughout this deprecation process. By proposing a modest LTV adjustment to 5%, you are striking a careful balance: protecting less technically sophisticated users who may not be able to unwind their positions easily, while still keeping the pool on a clear path to sunset. This kind of responsible, user-centric approach helps build long-term trust in Venus and its risk partners.

3 Likes
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I’m one of the users who got stuck in this situation. As someone relatively new to DeFi, I honestly couldn’t foresee this kind of issue happening and it’s been a tough experience. I truly appreciate the community stepping in to support users like me. It means a lot and shows how strong and helpful this ecosystem can be. Thank you for considering these changes!

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