Summary
Chaos Labs has completed a comprehensive analysis aimed at providing informed recommendations for the launch parameters for assets proposed for listing in the Isolated Lending markets. These are conservative recommendations aimed to ensure a safe and efficient introduction of these assets into the Venus protocol and are the basis for future optimization following the launch and after observing usage on each pool.
Pools:
- LIQUID STAKED BNB - WBNB, BNBx, stkBNB, ankrBNB
- TRON FAMILY - BTT, WIN, TRX, USDT, USDD
- DEFI - ANKR, BSW, ALPACA, ankrBNB, USDT, USDD
- GAMEFI - FLOKI, RACA, USDT, USDD
- STABLECOIN - HAY, USDT, USDD
Notes:
- DEFI pool - Given the higher risk profile of ALPACA and BIFI, we propose separating them into distinct pools, which could allow us more granularity in parameter setting. Additionally, this could enable more capital-efficient parameters for the other assets, such as ANKR and BSW.
- LIQUID STAKED BNB pool - we recommend launching the pool without the stablecoins (USDT and USDD), which will enable increasing LTs and allow more leverage for looping.
Methodology
Liquidation Threshold
Volatile Assets
To determine the liquidation threshold (LT) settings, we examine the historical price volatility of assets, including 30-day annualized volatilities and the biggest single-day price drop.
LST
For LSTs, we analyze their historical price volatility in relation to the underlying asset.
Stables
We set relatively conservative stablecoin LT to reflect the volatility of the borrowed assets in the isolated pools.
Collateral Factor
- LSTs, we recommend implementing a 3% buffer between the CF and LT
- Stablecoins - we recommend implementing a 5% buffer between the CF and LT
- Volatile Assets - we recommend implementing a 10% buffer between the CF and LT
Supply and Borrow Cap
Supply Cap
Applying Chaos Labs’ approach to setting initial supply caps for new assets, we propose setting the supply cap at 2X the on-chain liquidity available under the Liquidation Incentive (configured to 10%) price impact. Additionally, for the launch, we advise setting a restriction such that the supply cap does not exceed 25% of the total circulating on-chain supply for each asset.
Borrow Cap
- We set the borrowing cap for the volatile assets to
(IR curve kink)*(SupplyCap). This is set to allow sufficient liquidity for redemption in case of full supply and borrow caps utilization. - For LSTs - as the use case for borrowing LST is unclear, we recommend an initial borrow cap of 10% of the supply cap and will adjust according to the borrowing demand and market conditions.
USDT and USDD Borrow Caps
- The USDT and USDD borrow caps were set with the intention to function effectively as a “debt ceiling,” creating an upper bound on the stable borrow against the volatile assets in each pool. The initial recommendations are calculated as
sum(assetSupplyCap*LT)*2. This total is divided into 80% USDT and 20% USDD. - The USDT and USDD supply caps are set as
1.5*BorrowCap
IR Curves
We recommend the following setting for the isolated markets, which may be adjusted after analyzing the usage of the assets post-launch.
Volatile Assets + HAY
- Base - 0.02
- Kink - 0.5
- Multiplier - 0.2
- Jump Multiplier - 3
- Reserve factor- 0.25
Stablecoins (USDD and USDT) and WBNB
- Base - 0.02
- Kink - 0.8 (USDT+WBNB), 0.7 (USDD)
- Multiplier - 0.1
- Jump Multiplier - 2.5
- Reserve factor- 0.1
Recommendations
LIQUID STAKED BNB
| Asset | Collateral Factor | Liquidation Threshold | Supply Cap | Borrow Cap | Base | Kink | Multiplier | Jump Multiplier | Reserve Factor |
|---|---|---|---|---|---|---|---|---|---|
| WBNB | 77% | 80% | 24,000 | 16,000 | 0.01 | 0.8 | 0.035 | 3 | 0.25 |
| BNBx | 87% | 90% | 9,600 | 960 | 0.02 | 0.5 | 0.2 | 3 | 0.25 |
| stkBNB | 87% | 90% | 2,900 | 290 | 0.02 | 0.5 | 0.2 | 3 | 0.25 |
| ankrBNB | 87% | 90% | 8,000 | 800 | 0.02 | 0.5 | 0.2 | 3 | 0.25 |
STABLECOINS
| Asset | Collateral Factor | Liquidation Threshold | Supply Cap | Borrow Cap | Base | Kink | Multiplier | Jump Multiplier | Reserve Factor |
|---|---|---|---|---|---|---|---|---|---|
| HAY | 75% | 80% | 500,000 | 250,000 | 0.02 | 0.5 | 0.1 | 2.5 | 0.1 |
| USDT | 75% | 80% | 960,000 | 640,000 | 0.02 | 0.8 | 0.1 | 2.5 | 0.1 |
| USDD | 75% | 80% | 240,000 | 160,000 | 0.02 | 0.7 | 0.1 | 2.5 | 0.1 |
DEFI
| Asset | Collateral Factor | Liquidation Threshold | Supply Cap | Borrow Cap | Base | Kink | Multiplier | Jump Multiplier | Reserve Factor |
|---|---|---|---|---|---|---|---|---|---|
| ANKR | 20% | 30% | 17,700,000 | 8,850,000 | 0.02 | 0.5 | 0.2 | 3 | 0.25 |
| BSW | 20% | 30% | 11,600,000 | 5,800,000 | 0.02 | 0.5 | 0.2 | 3 | 0.25 |
| ALPACA | 20% | 30% | 1,500,000 | 750,000 | 0.02 | 0.5 | 0.2 | 3 | 0.25 |
| ankrBNB | 0 | 0% | 5,000 | 4,000 | 0.035 | 0.8 | 0.1 | 3 | 0.25 |
| USDT | 75% | 80% | 1,387,000 | 925,000 | 0.02 | 0.8 | 0.1 | 2.5 | 0.1 |
| USDD | 65% | 70% | 450,000 | 300,000 | 0.02 | 0.7 | 0.1 | 2.5 | 0.1 |
GAMEFI
| Asset | Collateral Factor | Liquidation Threshold | Supply Cap | Borrow Cap | Base | Kink | Multiplier | Jump Multiplier | Reserve Factor |
|---|---|---|---|---|---|---|---|---|---|
| FLOKI | 40% | 50% | 22,000,000,000 | 11,000,000,000 | 0.02 | 0.5 | 0.2 | 3 | 0.25 |
| RACA | 40% | 50% | 4,200,000,000 | 2,100,000,000 | 0.02 | 0.5 | 0.2 | 3 | 0.25 |
| USDT | 75% | 80% | 1,200,000 | 800,000 | 0.02 | 0.8 | 0.1 | 2.5 | 0.1 |
| USDD | 65% | 70% | 450,000 | 300,000 | 0.02 | 0.7 | 0.1 | 2.5 | 0.1 |
TRON FAMILY
| Asset | Collateral Factor | Liquidation Threshold | Supply Cap | Borrow Cap | Base | Kink | Multiplier | Jump Multiplier | Reserve Factor |
|---|---|---|---|---|---|---|---|---|---|
| BTT | 40% | 50% | 1,130,000,000,000 | 565,000,000,000 | 0.02 | 0.5 | 0.2 | 3 | 0.25 |
| WIN | 40% | 50% | 2,300,000,000 | 1,150,000,000 | 0.02 | 0.5 | 0.2 | 3 | 0.25 |
| TRX | 40% | 50% | 6,300,000 | 3,150,000 | 0.02 | 0.5 | 0.2 | 3 | 0.25 |
| USDT | 75% | 80% | 1,380,000 | 920,000 | 0.02 | 0.8 | 0.1 | 2.5 | 0.1 |
| USDD | 65% | 70% | 1,950,000 | 1,300,000 | 0.02 | 0.7 | 0.1 | 2.5 | 0.1 |