Summary
Chaos Labs has completed a comprehensive analysis to provide informed recommendations for the launch parameters for a new Venus isolated pool on Arbitrum. These initial recommendations aim to ensure a safe and efficient launch and are the basis for future optimization post-launch after observing usage on each pool.
LST Pool
Collateral Factor
- We use parameters for all assets aligned with those on other similar deployments.
- We recommend setting WETH’s collateral factor to zero to prevent farming of incentives, ensuring that liquidity can be used for LST/LRT leveraged yield strategies.
Supply and Borrow Caps
- Derived from on-chain liquidity; specifically, 2x the current amount of liquidity available in a single swap on a DEX aggregator at the point where slippage equals liquidation incentive (2%).
- The borrow cap for weETH and WETH is derived from the supply cap, using the Kink as the optimal point for borrow amounts, and from that, calculating a borrow cap at slightly higher than the Kink.
- wstETH uses a borrow cap set to 10% of the supply cap, given limited historical borrowing demand.
IR Curves
- WETH’s IR curve is set to allow for profitable leveraged yield strategies at the Kink.
- wstETH and weETH’s IR curves are set to allow borrowing, but are higher than WETH’s to prevent possible manipulation.
Pricing
- The strong peg stability, as well as anticipated use case, for wstETH and weETH leads us to recommend using a calculated oracle based on their respective exchange rates.
Additional Parameters
- Close Factor: 50%
- Liquidation Incentive: 2%
- minLiquidatableCollateral: 100 USD
Recommendations
| Asset | WETH | wstETH | weETH |
|---|---|---|---|
| Collateral Factor | 0% | 93% | 93% |
| Liquidation Threshold | 0% | 95% | 95% |
| Supply Cap | 14,000 | 8,000 | 4,600 |
| Borrow Cap | 12,500 | 800 | 2,300 |
| Kink | 80% | 45% | 45% |
| Base | 0% | 0% | 0% |
| Multiplier | 3.5% | 9% | 9% |
| Jump Multiplier | 80% | 300% | 300% |
| Reserve Factor | 20% | 25% | 25% |