Summary
A proposal to:
- Increase WETH’s supply and borrow caps on Venus’ ZKSync Core deployment.
- Increase ZK’s supply cap on Venus’ ZKSync Core deployment.
Motivation
WETH (ZKSync)
WETH has reached 95% supply cap utilization on ZKSync Core Pool, and its borrow cap is at 97% capacity.
Supply Distribution
Most of the top WETH suppliers use it for looping the same asset and borrow WETH. Most of the WETH supply is concentrated in the top two supply positions. This looping poses no liquidation risk for the Venus protocol but increases the borrowing cost for normal users.
Overall, WETH represents 61% of the value borrowed against WETH.
Borrow Distribution
The leading WETH borrow positions are mostly the same as those previously mentioned. Liquidation risk remains low, with most borrow demand concentrated among the top three borrowers.
Overall, WETH represents 70% of the collateral used to borrow WETH.
Recommendation
Given users’ behavior and on-chain liquidity, we recommend increasing the supply cap to 6,000 WETH and the borrow cap to 3,400 WETH.
ZK (ZKSync)
ZK has reached 86% supply cap utilization on the ZKSync Core Pool, and its borrow cap is at 29% capacity.
Supply Distribution
The majority of ZK suppliers maintain a supply-only position. Only three of them use ZK as collateral to loop over the same asset and borrow ZK to farm XVS rewards more effectively. All of the major positions pose little to no liquidation risk.
Overall, ZK represents 35% of the value borrowed against ZK.
Recommendation
Given users’ behavior and on-chain liquidity, we recommend increasing the supply cap to 50,000,000 ZK.
Specification
| Chain | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| ZKSync Core Pool | WETH | 3,000 | 6,000 | 1,700 | 3,400 |
| ZKSync Core Pool | ZK | 35,000,000 | 50,000,000 | 12,500,000 | - |