Chaos Labs - Risk Parameter Updates - 07/27/2023

Venus Governance Venus - Governance Proposals
1

Summary

A proposal to update risk parameters for:

  1. SXP - increase Base to 0.5
  2. Supply and Borrow caps:
    1. Increase ankrBNB borrow cap on LST isolated pool to 1,600
    2. Increase BNBx borrow cap on LST isolated pool to 1,920
    3. Increase USDD supply and borrow cap on TRON isolated pool to 2,700,000 and 1,800,000 respectively
  3. WBETH - increase CF to 70%

Analysis

SXP

As part of the SXP deprecation plan, SXP risk parameter have been updated to encourage users to repay their borrows and disincentivize supply, while reducing the collateral factors and supply and borrow caps to 0.

At this time, there are ~$3.2M in supply and ~45K in borrows. In order to expedite repayments of SXP loans we recommend increasing the borrow rate by increasing the Base to 0.5.

Following this update, we will continue monitoring the borrow position to analyze the impact of the increase, and propose further updates as needed.

Supply and Borrow Caps

At the time of publishing this post, the following assets have reached over 75% of their respective supply or borrow cap:

  1. ankrBNB (LST pool) borrow cap has reached 100%.
  2. BNBx (LST pool) borrow cap has reached ~77%.
  3. USDD (TRON pool) supply and borrow cap have reached ~89% and 92%, respectively.

ankrBNB and BNBx

The original borrow caps for the LSTs in the pool were set conservatively at 10% of the initial supply cap:

From Chaos Labs - Risk Parameter Recommendations for Isolated Markets:

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.

Given the current rewards in the pools, there is a clear use case for borrowing ankrBNB and BNBx to earn these rewards. With current liquidity levels, we recommend doubling both borrow caps.

We would like to highlight that there is currently one main account (0x4e42acaec7379db6c9325b5b11f4bcd7f373652a) borrowing BNBx and ankrBNB, amounting to 66% and 56% of the total borrows respectively.

USDD (TRON pool)

Analyzing current usage in the TRON pool, we recommend increasing the supply and borrow caps of USDD by 750,000 and 500,000 respectively.

WBETH

As WBETH price is highly correlated with that of ETH, and given the current usage of WBETH on Venus, we recommend increasing the CF to 70% which reflects the volatility of ETH with an additional 10% buffer. Any counter party risk should be reflected in the supply cap currently set 8000 WBETH, and can be lifted as on chain liquidity improves.

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