Reinstate Supply and Borrow Caps on Aave V3 Gnosis Instance
01Summary
Restore supply and borrow caps on Aave V3 Gnosis instance across 8 assets (wstETH, sDAI, GNO, WETH, EURe, USDC.e, xDAI, GHO) to pre-freeze levels in preparation for the Gnosis canonical bridge reopening, reversing earlier restrictions implemented after the Balancer exploit.
- Type
- parameter change
Key changes
- Increase wstETH supply cap from 1 to 15,000 and borrow cap from 1 to 150(medium)
- Increase sDAI supply cap from 1 to 24,000,000 and borrow cap from 0 to 1(high)
- Increase GNO supply cap from 1 to 140,000 and borrow cap from 1 to 20,000(high)
- Increase WETH supply cap from 1 to 3,600 and borrow cap from 1 to 2,400(medium)
- Increase EURe borrow cap from 1 to 22,500,000 (supply cap remains at 27,000,000)(high)
- Increase USDC.e supply cap from 1 to 12,000,000 and borrow cap from 1 to 11,000,000(high)
- Increase xDAI supply cap from 1 to 4,000,000 and borrow cap from 1 to 3,700,000(high)
- Increase GHO supply cap from 1 to 1,500,000 and borrow cap from 1 to 1,400,000(high)
Notable concerns
- Caps were previously frozen due to Balancer exploit and bridge pause; restoration assumes successful bridge reopening and arbitrage market recovery
- Price deviation risks between DEX prices and oracle feeds during bridge pause period could have caused liquidation inefficiencies and potential bad debt accrual
Generated by Kvorum
02Description
Simple Summary
The Gnosis protocol team has communicated its intention to reopen the canonical bridge, prompting us to initiate the governance process to restore the decreased caps. Specifically, we propose to reverse the previously implemented freeze of all assets on the Gnosis Chain, restoring the supply and borrow caps to levels that marginally exceed the current supply and borrow balances.
Motivation
Earlier reductions of the supply and borrow caps on the Gnosis instance were proposed as a precautionary measure in response to the Balancer exploit. The pause of the bridge initiated by the Gnosis team aimed to maximize the chances of asset recovery but created a short-lived risk of mispricing.
As the assets effectively became locked within the chain, the efficiency of pricing was at stake, as arbitrageurs were unable to maintain alignment between disjoined markets. This increased the likelihood of out-of-sync DEX prices relative to the oracle feeds used by the Aave instance.
As previously mentioned, price deviations between DEX prices on the chain and the oracle feeds could cause some liquidatable positions to be unprofitable for the liquidator, potentially leading to the accrual of bad debt if the price changes were not to revert before the prices converge.
With the Gnosis canonical bridge expected to reopen shortly, arbitrage activity is expected to resume, which should restore price alignment and market efficiency of the network. This proposal is therefore made in advance of the reopening, to ensure that once standard market operations resume, Aave can promptly restore lending activity on the Gnosis network without unnecessary restrictions.
Proposed Changes
At the time of writing, the supply and borrow caps on a broad list of assets on the Gnosis instance are configured to one. Aiming to restore market dynamics to their pre-bridge-freeze state, we recommend increasing the caps to levels that align with both the risk profile of the instance, lending demand, and available on-chain liquidity.
Specification
| Instance | Asset | Current Supply | Current Supply Cap | Recommended Supply Cap | Current Borrow | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|---|---|
| Gnosis | wstETH | 12,201 | 1 | 15,000 | 94 | 1 | 150 |
| Gnosis | sDAI | 17,500,552 | 1 | 24,000,000 | - | 0 | 1 |
| Gnosis | GNO | 94,532 | 1 | 140,000 | 15,252 | 1 | 20,000 |
| Gnosis | WETH | 2,762 | 1 | 3,600 | 1,811 | 1 | 2,400 |
| Gnosis | EURe | 13,537,147 | 27,000,000 | - | 12,194,512 | 1 | 22,500,000 |
| Gnosis | USDC.e | 7,805,609 | 1 | 12,000,000 | 6,246,190 | 1 | 11,000,000 |
| Gnosis | xDAI | 3,038,106 | 1 | 4,000,000 | 2,524,773 | 1 | 3,700,000 |
| Gnosis | GHO | 799,613 | 1 | 1,500,000 | 689,379 | 1 | 1,400,000 |
References
- Implementation: AaveV3Gnosis
- Tests: AaveV3Gnosis
- Discussion
- Snapshot: Direct to AIP
Copyright
Copyright and related rights waived via CC0.
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04Actions
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