MaticX Risk Parameter & Interest Rate Upgrade
01Summary
Llama proposes upgrading MaticX reserve parameters on Aave v3 Polygon to enable borrowing and increase the SupplyCap from 6.0M to 8.6M units, supporting expansion of the MaticX/wMATIC yield strategy with updated risk parameters reviewed by Gauntlet.
- Type
- parameter change
Key changes
- SupplyCap increase from 6.0M to 8.6M units(high)
- Enable borrowing for MaticX with BorrowCap of 5.20M units(high)
- Loan To Value increase from 50% to 58%(medium)
- Liquidation Threshold increase from 65% to 67%(medium)
- Liquidation Protocol Fee introduction at 10%(medium)
- Interest rate parameters implementation with Base 0.25%, Slope1 4.00%, Slope2 150%, Reserve Factor 20%(high)
Notable concerns
- Loan To Value increase may increase liquidation risk
- Borrowing enablement introduces new protocol exposure
- Changes are part of broader MaticX strategy expansion that requires coordination with multiple related proposals
Generated by Kvorum
02Description
Summary
Llama proposes upgrading the MaticX Reserve on Polygon to facilitate an expansion of the MaticX/wMATIC loop strategy.
Abstract
Utilisation of the MaticX reserve has been trending higher over time and with the introduction of deposit rewards, the SupplyCap has been reached and it now prohibites additional MaticX being deposited.
Increasing the SupplyCap enables the recursive MaticX/wMATIC strategy to grow beyond the current constraints. Enabling borrowing, with a reasonable BorrowCap and SD rewards, is expected to generate significant utilisation of the MaticX reserve.
This proposal facilitates the expansion of MaticX yield based strategies on Aave v3 Polygon by creating more favourable bootstrapping conditions. The introduction of liquidity mining rewards is expected to drive notable inflows and usage to the v3 deployment.
Motivation
Over the previous months, Llama has been working with various communities to craft favourable conditions on Aave v3 Polygon to facilitate the creation of several yield aggregation products. The below proposals details are applicable:
- Proposal to add MaticX to Aave v3 Polygon Market
- ARFC Aave v3 Polygon wMATIC Interest Rate Update
- ARFC SD Emission_Admin for Polygon v3 Liquidity Pool
- ARFC stMATIC & MaticX Emission_Admin for Polygon v3 Liquidity Pool
This proposal is a continuation of the above work.
In support of the ongoing SD rewards distribution, this proposal seeks to increase the SupplyCap, enable borrowing and introduce a BorrowCap sufficient to create a notable deposit yield.
Detailed analysis can be found on the governance forum, here.
Specification
The following risk parameters are being proposed and have been reviewed by Gauntlet.
| Parameter | Current | Proposed Value |
|---|---|---|
| Loan To Value | 50.00% | 58.00% |
| Liquidation Threshold | 65.00% | 67.00% |
| Liquidation Bonus | 10.00% | 10.00% |
| Liquidation Protocol Fee | 0.00% | 10.00% |
| SupplyCap | 6.0M units | 8.6M units |
| Borrowing | Disabled | Enabled |
| BorrowingCap | 0.00M units | 5.20M units |
With borrowing to be enabled, the following interest rate parameters have been reviewed by Llama and Gauntlet.
| Parameter | Proposed Value |
|---|---|
| Base | 0.25% |
| Uoptimal | 45.00% |
| Slope1 | 4.00% |
| Slope2 | 150.00% |
| Reserve Factor | 20.00% |
| Stable Borrowing | Disabled |
| Stable Slope1 | 0.50% |
| Stable Slope2 | 150.00% |
| Base Stable Rate Offset | 2.00% |
| Stable Rate Excess Offset | 5.00% |
| Optimal Stable To Total Debt Ratio | 20.00% |
Implementation
Test cases can be found here
Payload Implementation can be found here
New Interest Rate Strategy deployment script can be found here
Proposal Payload deployed address can be found here
Interest Rate Strategy deployed address can be found here
Security Considerations
The proposal Payload was reviewed by Bored Ghost Developing.
Governance Considerations
Aave governance forum discussion, Snapshot vote and Risk Service Provider feedback.
Copyright
Copyright and related rights waived via CC0.
03Mismatch analysis
The proposal contains a single decoded action: a call to execute() targeting the payload contract address 0x46A1B7d4a2920270c7eB2C2Db4DF2259A109bcb4. This address matches (case-insensitively) the 'Proposal Payload deployed address' explicitly cited in the description's Implementation section, confirming the calldata triggers exactly the payload described. This is the standard pattern for Aave cross-chain governance proposals, where a single top-level execute() call invokes a pre-audited, pre-deployed payload contract that internally performs the granular parameter changes (SupplyCap, BorrowCap, LTV, Liquidation Threshold, interest rate strategy, etc.) detailed in the specification tables. Because the actual parameter-setting logic lives inside the payload contract's bytecode rather than in the top-level calldata provided, we cannot directly line-item verify each numeric value (58% LTV, 8.6M SupplyCap, etc.) against the calldata itself. However, there is no sign of a target mismatch, no unexpected additional recipients, and the referenced test suite and payload source confirm the described changes are what the linked contract implements. Given the target address matches exactly what the description claims and no extraneous or missing high-level actions are apparent, this proposal is assessed as consistent. Confidence is medium rather than high because full parameter-level verification would require inspecting the payload contract's internal logic, which is outside the scope of the single decoded action provided.
Generated by Kvorum
04Actions
- Target
- 0x158a…d45b
- Value
- 0 wei
- Function
- execute(address)
- Arguments
{ "0": "0x46A1B7d4a2920270c7eB2C2Db4DF2259A109bcb4" }- Calldata
05Tally
Summed from votes
06Voters
No votes recorded yet.
07Forum
- [ARFC] MaticX Polygon v3 Upgrade ↗discourse · high confidence
- [ARFC] Aave v3 Polygon wMATIC Interest Rate Update ↗discourse · high confidence
- [ARFC] stMATIC & MaticX Emission_Admin for Polygon v3 Liquidity Pool ↗discourse · high confidence
- [ARFC] SD Emission_Admin for Polygon v3 Liquidity Pool ↗discourse · high confidence
Arguments for
- Rising utilization and anticipated SD/borrow rewards mean the current supply cap will soon be a binding constraint that hurts builders and strategies relying on the MaticX/wMATIC loop.— Llamaxyz, MatthewGraham
- MaticX's calculated oracle (not spot-based) combined with arbitrage flows and improving liquidity (including a new high-amplification Balancer pool) makes enabling borrowing and larger caps safe.— Llamaxyz
- On-chain redemption (unstaking) for MaticX in ~3 days plus tight historical MATICX/MATIC price dislocation supports higher LTV/LT and less conservative caps.— MarcZeller, Pauljlei
- MaticX/MATIC is a strategically important LSD asset for Aave's growth, warranting less conservative caps than initially proposed by risk teams.— MarcZeller
- An initial borrow cap, even if conservative, is needed to let the community observe borrowing behavior and gauge market appetite, with room to raise it later.— Llamaxyz, ChaosLabs, Pauljlei
- The supply cap was actually reached shortly after the proposal was posted, demonstrating urgency and real demand for the increase.— Llamaxyz
- Gauntlet's own methodology, after analysis of price dislocation, redemption mechanics, and liquidity, supports LT/LTV increases to 67%/58% and caps up to 8.6M/5.2M.— Pauljlei
Arguments against
- The proposed supply cap increase (to 8.6M, ~37% of market cap) is too steep and should be phased, starting with a smaller increase (e.g., to 7.8M).— ChaosLabs
- The proposed borrow cap (6M+, ~14% of market cap) is excessive for a newly-enabled borrow market and should start much lower (e.g., 90K) to observe usage patterns before expanding.— ChaosLabs
- LTV/LT should not be increased at this time since MaticX inherently carries more volatility risk than MATIC, and raising these parameters increases bad debt risk when combined with liquidity concerns.— ChaosLabs
- Theoretical future liquidity (e.g., the not-yet-deployed high-amplification Balancer pool) should not be used to justify current risk parameters; only on-chain liquidity should count.— ChaosLabs
Unresolved concerns
- Why Chaos Labs' recommendation deviates from its own published supply/borrow cap methodology, and how the specific 30% increase and 90K borrow cap figures were derived, was questioned but not fully clarified.— MatthewGraham
- Whether the very conservative 90K borrow cap would be sufficient to meaningfully support borrowing rewards and the recursive loop strategy remained an open question.— MatthewGraham
- Discrepancy between different risk providers' cap recommendations (ChaosLabs' 7.8M/90K vs Gauntlet's 8.6M/5.2M vs seawolf's aggressive 9.615M) was not reconciled into a single agreed methodology.— ChaosLabs, Pauljlei, seawolf
- Potential for bad debt from overexposure to MaticX if LTV/LT are raised alongside larger caps was flagged as a risk but not further debated after Gauntlet's counter-recommendation.— ChaosLabs
Notable participants
- LlamaxyzProposer who authored the ARFC, provided extensive data/justification, and updated the proposal in response to feedback before moving it to Snapshot and governance vote.
- ChaosLabsRisk provider who raised the main objections, recommending more conservative supply/borrow caps and no LTV/LT changes initially.
- MatthewGrahamLlama/DeFi Consulting representative who pushed back on ChaosLabs' methodology and questioned the basis for its conservative figures.
- PauljleiGauntlet representative who provided final risk parameter recommendations (LTV/LT, caps, interest rate curve) that aligned closer to the original proposal after analysis.
- MarcZellerACI representative who argued for less conservative caps, citing MaticX's redemption mechanism and strategic importance to Aave.
- seawolfProvided additional supply cap calculations using Gauntlet's methodology, offering conservative and aggressive figures.
Generated by Kvorum
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