Gauntlet makes the following recommendations to optimize risk and capital efficiency for Venus:
- We recommend decreasing BNB collateral factor from 80% to 75%. This would reduce the Value at Risk (VAR) for Venus from $7.7m → $270k to minimize risk for “Black Thursday” events.
Supply Caps and Borrow Caps (denominated in TOKEN NOT USD):
|Symbol||Current Supply Cap||Current Borrow Cap||VIP 77 supply caps||Recommended Supply Cap||Recommended Borrow Cap|
This set of parameter updates seeks to maintain the overall risk tolerance of the protocol while making risk trade-offs between specific assets.
Gauntlet’s parameter recommendations are driven by an optimization function that balances 3 core metrics: insolvencies, liquidations, and borrow usage. Parameter recommendations seek to optimize for this objective function. Our agent-based simulations use a wide array of varied input data that changes on a daily basis (including but not limited to asset volatility, asset correlation, asset collateral usage, DEX / CEX liquidity, trading volume, expected market impact of trades, and liquidator behavior). Existing insolvencies are excluded from our simulations and VaR and LaR numbers. Gauntlet’s simulations tease out complex relationships between these inputs that cannot be simply expressed as heuristics. As such, the input metrics we show below can help understand why some of the param recs have been made but should not be taken as the only reason for recommendation. The individual collateral pages on the Gauntlet’s Venus Risk Dashboard cover other key statistics and outputs from our simulations that can help with understanding interesting inputs and results related to our simulations.
Risk Off Liquidations:
Whenever we lower collateral factors, there’s a chance that some users may immediately become liquidatable as a result. There are a number of accounts that lend and borrow stablecoins and keep their balances just slightly above the liquidation threshold.
Reducing the collateral factor of BNB by 5% would push 90 accounts from
just above the collateral factor to just below the collateral factor. The accounts have a total borrow value of $165k. The top account has a borrow balance of $150k. Most of the accounts are extremely small.
Supply Caps and Borrow Caps:
In light of the recent abnormal liquidations and activity across many lending protocols, Gauntlet recommends conservative borrow and supply caps on all assets, particularly on those who have low liquidity and/or supply on BSC, in order to significantly lower the potential for price manipulation. Over time, as the Venus lending market grows for many of these assets, we will continue to monitor these parameters and recommend adjustments as needed.
Top 10 borrowers, Aggregate Positions and Borrow usages
Top 10 borrowers, Breakdown of Borrower Supply
Top 10 Borrowers Breakdown of Borrows
Above shows the distribution in risk among the top borrowers - A large amount of BNB is concentrated in one borrower, which could lead to insolvencies. Because of this, we can observe why a large portion of the VaR is in BNB.
The community should use Gauntlet’s Venus Risk Dashboard to better understand the updated parameter suggestions and general market risk in Venus.
Value at Risk represents the 95th percentile insolvency value that occurs from simulations we run over a range of volatilities to approximate a tail event.
Liquidations at Risk represents the 95th percentile liquidation volume that occurs from simulations we run over a range of volatilities to approximate a tail event.
- Gauntlet to put up a snapshot vote for the community to vote on