Summary
A proposal to:
- Increase ZK’s borrow cap on Venus’s ZkSync deployment.
- Increase USDC.e’s supply and borrow caps on Venus’s ZkSync deployment.
All recommended increases are backed by Chaos Labs’ risk simulations, which consider the user behavior, on-chain liquidity, and price impact, ensuring that the higher cap does not introduce additional risk to the platform.
Motivation
ZK (ZkSync)
ZK has reached 66% supply cap utilization while its borrow cap is fully utilized.
Supply Distribution
ZK’s supply remains well distributed, with none of the top suppliers presenting an immediate risk of liquidation.
Borrow Distribution
The largest borrow position of ZK is against ZK itself, significantly reducing the risk of liquidation.
Overall, ZK is the most popular collateral asset against ZK borrows, reducing the risk of liquidations.
Recommendation
Given user behavior and on-chain liquidity, we recommend a significant increase to the borrow cap.
USDC.e (ZkSync)
USDC.e has reached 69% of its supply cap and 100% of its borrow cap.
Supply Distribution
USDC.e’s supply is not highly concentrated, with nearly all top suppliers engaging in looping behaviors, reducing the risk of liquidation.
Looping continues to be the most popular use case for USDC.e as collateral, driven by the ZK Ignite program.
Borrow Distribution
There is significant overlap between top suppliers and borrowers because of the looping behaviors. This behavior does not present a risk.
Recommendation
Given user behavior, we recommend increasing both caps. While the supply cap is not highly utilized, an increase in the borrow cap is likely to drive more supply.
Specification
| Market | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| ZkSync | ZK | 200,000,000 | - | 12,500,000 | 100,000,000 |
| ZkSync | USDC.e | 24,000,000 | 31,000,000 | 10,800,000 | 28,000,000 |
Disclaimer
Chaos Labs has not been compensated by any third party for publishing this recommendation.