KVORUM
aaveSource: Aave governor v2 · #206

Risk Parameter Updates Aave V3 Optimism

executedApr 21, 2023, 01:26 PM UTCbyBC0xbc54…7df0

01Summary

AISummary by Kvorumclaude-haiku-4-5

Proposal to adjust five risk parameters (Loan-to-Value, Liquidation Threshold, and Liquidation Penalty) for WBTC and DAI on Aave V3 Optimism. Changes include increasing WBTC LTV from 70% to 73%, WBTC Liquidation Threshold from 75% to 78%, reducing WBTC Liquidation Penalty from 9.4% to 8.5%, increasing DAI LTV from 75% to 78%, and increasing DAI Liquidation Threshold from 80% to 83%. Simulations project ~$155,000 borrow increase with no increase in protocol losses (VaR and Extreme VaR).

Type
parameter change

Key changes

  • WBTC Loan-to-Value increased from 70% to 73% (+3%)(high)
  • WBTC Liquidation Threshold increased from 75% to 78% (+3%)(high)
  • WBTC Liquidation Penalty decreased from 9.4% to 8.5% (-0.9%)(medium)
  • DAI Loan-to-Value increased from 75% to 78% (+3%)(high)
  • DAI Liquidation Threshold increased from 80% to 83% (+3%)(high)

Notable concerns

  • Changes maintain projected VaR and Extreme VaR at current levels despite increased capital efficiency
  • All parameter changes are at the ±3% upper bound guideline
ContractsAave V3 Optimism - WBTCAave V3 Optimism - DAI
Generated by Kvorum
model: claude-haiku-4-5
provider: anthropic
profile: anthropic-fast-v1
prompt: v1.0
generated: 2mo ago
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02Description

373 words

Simple Summary

A proposal to adjust five (5) total risk parameters, including Loan-to-Value, Liquidation Threshold, and Liquidation Bonus, across two (2) Aave V3 Optimism assets.

Motivation

Chaos Labs’ Parameter Recommendation Platform runs hundreds of thousands of agent-based off-chain and on-chain simulations to examine how different Aave V3 risk parameters configurations would behave under adverse market conditions - and find the optimal values to maximize protocol borrow usage while minimizing losses from liquidations and bad debt.

Note: As a general guideline, we limit the proposed changes by ±3% for all parameters as a high/low bound for a given proposal. This ensures more controlled changes and allows us to analyze their effect on user behavior before recommending further amendments to the parameters if the optimal configuration is outside this range.

Please find more information on the parameter recommendation methodology here.

You can also view the simulation results and breakdown for the different assets by clicking on them on this page.

The output of our simulations reveals an opportunity to increase LTVs and LTs for WBTC and DAI on V3 Optimism, resulting in improved capital efficiency of the system, with no effect on the projected VaR (95th percentile of the protocol losses that will be accrued due to bad debt from under-collateralized accounts over 24 hours) and EVaR (Extreme VaR, the 99th percentile of the protocol losses that will be accrued due to bad debt from under-collateralized accounts over 24 hours)

Simulating all changes jointly yields a projected borrow increase of ~$155,000, with no increase in VaR and Extreme VaR compared to simulations with the current parameters.

Specification

The following risk parameter proposal is presented below:

AssetParameterCurrentRecommendedChange
WBTCLiquidation Threshold75%78%+3%
WBTCLoan-to-Value70%73%+3%
WBTCLiquidation Penalty9.4%8.5%-0.9%
DAILiquidation Threshold80%83%+3%
DAILoan-to-Value75%78%+3%

References

Forum Post

Tests

Proposal payload implementation

Copyright

Copyright and related rights waived via CC0.

03Mismatch analysis

AIMismatch analysis by Kvorum

A calldata-vs-description analysis is not generated yet. Review the decoded actions →

04Actions

1 total
#0execute(address)chain 0x1
Target
0x5f5c…6711
Value
0 wei
Function
execute(address)
Arguments
{
  "0": "0xC4421Eaf9087aa0B8f453C130Dc024c3Eb3A34D7"
}
Calldata

05Tally

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Outcome (current)—
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06Voters

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07Forum

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