Increase wMATIC Supply Cap & BAL Borrow Cap
01Summary
Llama proposes increasing wMATIC Supply Cap from 47M to 66M units and BAL Borrow Cap from 256,140 to 290,000 units on Polygon v3 to accommodate inflows from Balancer liquidity pool migrations and support increased borrowing demand, with support from risk service providers Chaos Labs and Gauntlet.
- Type
- parameter change
Key changes
- Increase wMATIC Supply Cap from 47M to 66M units on Polygon v3 to accommodate bb-a-wMATIC liquidity pool deposits and migration of 14.94M wMATIC from v2 to v3, with estimated 23.03M additional inflows from Balancer pool migrations(high)
- Increase BAL Borrow Cap from 256,140 to 290,000 units (13.2% increase) on Polygon v3 to support elevated borrowing demand during Tetu rewards period(medium)
Notable concerns
- Both risk adjustments address capacity constraints; current wMATIC utilization at 57% would be insufficient for projected inflows without the supply cap increase
Generated by Kvorum
02Description
Summary
Llama proposes increasing the wMATIC Supply Cap and BAL Borrow Cap on the Polygon v3 deployment after each respective proposal successfully passed a Snapshot vote.
Abstract
This publication presents Aave with the opportunity to increase the wMATIC SupplyCap from 47M to 66M units and the BAL Borrow Cap from 256,140 to 290,000 units on the Polygon v3 deployment.
Increasing the wMATIC Supply Cap will enable inflows from new Balancer bb-a-wMATIC liquidity pools and migration of user funds from v2 to v3 without exceeding the deposit restriction on v3.
Increasing the BAL Borrow Cap will enable Aave to benefit from elevated borrowing demand at a time when Tetu is offering considerable rewards.
Both risk service providers support increasing the BAL Borrowing Cap and wMATIC Supply Cap parameters.
Motivation
wMATIC Supply Cap
With Liquidity Mining (LM) ongoing on Polygon v3 by Polygon Foundation, Lido DAO and Stader Labs, the wMATIC v3 deposit rate comfortably exceeds the v2 deposits rate. This creates favourable conditions, encouraging users to migration wMATIC deposits. There is 14.94M units of wMATIC deposited in Aave v2 on Polgyon.
The MaticX/wMATIC and stMATIC/wMATIC Balancer Liquidity pools are migrating to MaticX/bb-a-wMATIC and stMATIC/bb-a-wMATIC. An estimated 23.03M units of wMATIC are expected to be deposited into the wMATIC reserve on Polygon v3.
The utilisation of the wMATIC reserve is 57% with 26.72M of 47.00M units deposited.
The current SupplyCap is insufficient to accomodate the potential inflows of wMATIC into the reserve. As a result, this proposal seeks to increase the SupplyCap from 47M to 66M units. A Supply Cap of 66M enables the bb-a-wMATIC linear pools on Balancer to deposit into Aave and 100% of the v2 wMATIC deposits to migrate to v3.
BAL Borrow Cap
The BAL Borrow Cap utilisation has been edging higher in recent weeks and previous Supply Cap adjustment proposals did not adjust the Borrow Cap.
This publication will increase the Borrow Cap modestly by an additional 13.2%, or 33.86k units, from 256,140 to 290,000 units. The Supply Cap is to remain unchanged as there is sufficient capacity in Aave v3 to enable migration of user funds from v2 to v3 on Polygon. Separately, an AIP has been submitted to add BAL to Aave v3 on Ethereum.
Specification
The following risk parameters are being presented by Llama:
Ticker: wMATIC
Contract: 0x0d500b1d8e8ef31e21c99d1db9a6444d3adf1270
| Parameter | Current Value | Proposed Value |
|---|---|---|
| Supply Cap | 47M units | 66M units |
Ticker: BAL
Token Contract: 0x9a71012B13CA4d3D0Cdc72A177DF3ef03b0E76A3
| Parameter | Current Value | Proposed Value |
|---|---|---|
| Borrow Cap | 256,140 | 290,000 |
Implementation
A list of relevant links like for this proposal:
- wMATIC Supply Cap Governance Forum Discussion
- BAL Borrow Cap Governance Forum Discussion
- Test Cases
- Payload Implementation
- Deployed Contracts
Chaos Labs and Gauntlet are both supportive of the risk parameters presented above.
The proposal Payload was reviewed by Bored Ghost Developing.
Copyright
Copyright and related rights waived via CC0.
03Mismatch analysis
A calldata-vs-description analysis is not generated yet. Review the decoded actions →
04Actions
- Target
- 0x158a…d45b
- Value
- 0 wei
- Function
- execute(address)
- Arguments
{ "0": "0x47938B58f104b4E06A5572faa9Cb3c3Cd53F15a4" }- Calldata
05Tally
Summed from votes
06Voters
No votes recorded yet.
07Forum
- [ARFC] Polygon v3 BAL Supply & Borrow Cap Increase ↗discourse · high confidence
- [ARFC] wMATIC Supply Cap Increase ↗discourse · high confidence
Arguments for
- BAL supply and borrow caps on Polygon v3 are at high utilization (84.91% and 96.24%) and trending higher, indicating a need for capacity increase to support user demand.— Llamaxyz, TokenLogic
- A 75% supply cap relative to circulating supply on a network is precedent-setting for LSTs and can justify a similar approach for BAL given strong liquidity on Ethereum for redemption or swaps.— Llamaxyz
- There is sufficient capacity in Aave v3 to accommodate migration of the 24.55k BAL units currently in v2, enabling consolidation of liquidity.— Llamaxyz
Arguments against
- The concentration of BAL on Aave Polygon (~58-63% of total circulating supply on Polygon) represents excessive protocol exposure and creates unacceptable systemic risk.— ChaosLabs, WintermuteGovernance
- Aave should instead pursue expanding BAL support on Ethereum (via pending V3 proposal or unfreezing V2) rather than increasing Polygon concentration to distribute risk across chains.— WintermuteGovernance
Unresolved concerns
- Whether the precedent of 75% circulating supply caps for LSTs on their native chains is appropriately applicable to non-native assets like BAL.— Llamaxyz, ChaosLabs
- How BAL's lack of a redemption contract on Ethereum compares to LSTs in terms of actual liquidity risk and whether swap-based alternatives are sufficiently reliable.— Llamaxyz, ChaosLabs
Notable participants
- LlamaxyzCo-author of the proposal arguing for increased BAL caps and defending the 75% circulating supply benchmark.
- TokenLogicCo-author of the proposal.
- ChaosLabsRisk analyst consistently opposing supply cap increase but supporting the borrow cap increase to 290k units.
- WintermuteGovernanceGovernance delegate agreeing with risk concerns and proposing alternative of expanding BAL on Ethereum instead.
- MatthewGrahamCoordinator who revised the proposal in response to feedback, combining BAL borrow cap and wMATIC supply cap changes.
- GauntletRisk analyst supporting the borrow cap increase to 290k units.
Generated by Kvorum
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