Chaos Labs Risk Parameter Updates - Decrease Supply and Borrow Caps on Aave V3
01Summary
Reduce supply and borrow caps for five underutilized stablecoins across Aave V3 (crvUSD on Ethereum, LUSD on Optimism, sUSDe on Ethereum, DAI on Optimism, and USDC on BNB Chain) to better match actual demand and reduce protocol risk exposure to potential depegging events or hacks.
- Type
- parameter change
Key changes
- Reduce crvUSD supply cap on Ethereum from 60,000,000 to 5,000,000 (current utilization 0.85%)(high)
- Reduce crvUSD borrow cap on Ethereum from 50,000,000 to 2,500,000 (current utilization 0.80%)(high)
- Reduce LUSD supply cap on Optimism from 3,000,000 to 2,000,000 (current utilization 7.83%)(medium)
- Reduce LUSD borrow cap on Optimism from 1,210,000 to 500,000 (current utilization 11.33%)(medium)
- Reduce sUSDe supply cap on Ethereum from 85,000,000 to 4,000,000 (current utilization 1.14%)(high)
- Reduce DAI supply cap on Optimism from 25,000,000 to 10,000,000 (current utilization 12.17%)(medium)
- Reduce DAI borrow cap on Optimism from 16,000,000 to 7,000,000 (current utilization 17.00%)(medium)
- Reduce USDC supply cap on BNB Chain from 50,000,000 to 15,000,000 (current utilization 6.02%)(medium)
Notable concerns
- Protocol exposure to stablecoin depegging events addressed by reducing caps on underutilized assets
- Risk management strategy acknowledges caps can be adjusted upward if demand increases in the future
Generated by Kvorum
02Description
Simple Summary
Decrease supply and borrow caps for underutilized stablecoins on Aave V3.
Motivation
As part of our ongoing strategy to optimize risk management on Aave, this proposal aims to address the low utilization of certain stablecoins by significantly reducing their supply cap and borrow cap values.
We recommend reducing the caps for various stablecoins that have consistently shown low supply and borrow demand over an extended period. All targeted stablecoins have demonstrated an average supply and borrow cap utilization below 15% for the last month. By keeping tighter caps relative to current demand, we aim to protect the protocol from potential risks associated with abnormal or unexpected events. These risks include significant stablecoin depegging and major hacks, which could result in an unexpected surge of risk in the protocol.
Should demand for these stablecoins increase, we can adjust the caps accordingly based on our established supply and borrow cap methodology.
This approach seeks to enhance the protocol’s resilience and stability in fluctuating market conditions, protecting the interests of Aave users and stakeholders.
Notable Low Utilization Stablecoins (crvUSD, LUSD)
There is currently low demand and utilization for crvUSD and LUSD across multiple Aave markets, highlighting a need for reassessment of borrow caps to match the reduced activity:
- crvUSD on Ethereum has a current supply utilization of only 0.85%, which saw spikes up to only 4% in the last six months.
- LUSD on Optimism also continues to experience low utilization rates, with just 7.83% supply utilization.
Ethena sUSDe
The supply utilization of Ethena sUSDe spiked to 4% during the listing and later stabilized around 1%. Maintaining a supply cap so high exposes the protocol to unnecessary risk.
Highly Liquid Stablecoins (DAI, USDC)
While DAI on AAVE V3 Optimism and USDC on AAVE V3 BNB Chain are highly liquid safe assets, the high supply cap causes the markets to be underutilized.
Specification
The target recommendations are calculated as twice the highest demand observed over the past six months or as 75% of the on-chain supply, whichever is lower. We suggest lowering the supply and borrow caps for the following assets, as outlined below.
| Market | Asset | Current Supply Cap | Current Supply Utilization | Recommended Supply Cap | Current Borrow Cap | Current Borrow Utilization | Recommended Borrow Cap |
|---|---|---|---|---|---|---|---|
| Ethereum | crvUSD | 60,000,000 | 0.85% | 5,000,000 | 50,000,000 | 0.80% | 2,500,000 |
| Optimism | LUSD | 3,000,000 | 7.83% | 2,000,000 | 1,210,000 | 11.33% | 500,000 |
| Ethereum | sUSDe | 85,000,000 | 1.14% | 4,000,000 | - | - | - |
| Optimism | DAI | 25,000,000 | 12.17% | 10,000,000 | 16,000,000 | 17.00% | 7,000,000 |
| BNB | USDC | 50,000,000 | 6.02% | 15,000,000 | 45,000,000 | 5.39% | 10,000,000 |
References
- Implementation: AaveV3Ethereum, AaveV3Optimism, AaveV3BNB
- Tests: AaveV3Ethereum, AaveV3Optimism, AaveV3BNB
- Snapshot
- Discussion
Copyright
Copyright and related rights waived via CC0.
03Mismatch analysis
The proposal describes a set of specific supply/borrow cap reductions for crvUSD, LUSD, sUSDe, DAI, and USDC across Ethereum, Optimism, and BNB Chain markets, with precise before/after values in a specification table. The only decoded on-chain action available is a single call to execute() on a contract address on Ethereum, with no decoded arguments — this is consistent with the standard Aave governance payload pattern where the actual parameter-setting logic (calls to PoolConfigurator.setSupplyCap/setBorrowCap for each asset) is embedded in the target contract's bytecode rather than passed as calldata arguments, and thus is not visible in this decode. Because the decoded action carries no parameter details, it is not possible to directly verify that the specific cap values in the table match what the payload will execute, nor to confirm whether separate actions for Optimism and BNB Chain payloads exist (the description references three separate implementation contracts by chain, but only one Ethereum-chain action is decoded here). This is a limitation of the available decoded data rather than evidence of an actual mismatch — nothing in the decoded call contradicts the description's claims. Given this, I cannot assign high confidence to a full verification, so I set confidence to low and assessment to consistent, since no contradiction was found, only insufficient detail to fully confirm the specific numeric claims.'
Generated by Kvorum
04Actions
- Target
- 0xbbb0…ba9c
- Value
- 0 wei
- Function
- fallback()
- Arguments
{}- Calldata
05Tally
Summed from votes
06Voters
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07Forum
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