Adjust BAT, ZRX collateral factors
01Summary
Increase collateral factors for BAT and ZRX tokens on Compound protocol from their current levels to 65% (0.65) to improve capital efficiency, based on stress test results showing these assets are among the lowest risk collateral.
- Type
- parameter change
Key changes
- Set BAT collateral factor to 65% (0x6C8c6b02E7b2BE14d4fA6022Dfd6d75921D90E4E)(medium)
- Set ZRX collateral factor to 65% (0xB3319f5D18Bc0D84dD1b4825Dcde5d5f7266d407)(medium)
Generated by Kvorum
02Description
Adjust BAT, ZRX collateral factors
Summary
We’re excited to propose changes to the Compound protocol that will improve capital efficiency for borrowers. We’ve run extensive stress tests of the protocol, the results of which we have shared here. These results identify BAT and ZRX as two of the lowest risk collateral assets, and we are increasing the collateralFactor for these two assets to allow users to better take advantage of these markets.
03Mismatch analysis
The proposal states it will raise the collateral factors for BAT and ZRX to improve capital efficiency, citing risk analysis for these two specific assets. The decoded calldata contains exactly two actions, both calling the Comptroller's _setCollateralFactor function — one targeting the cBAT market address and one targeting the cZRX market address, both setting the factor to 650000000000000000 (65% in 18-decimal fixed point). This matches the known Compound cToken addresses for BAT and ZRX. The description does not specify an exact numeric collateral factor, but its qualitative claim (increase for BAT and ZRX) is fully consistent with the two actions present — no unrelated markets, no extra recipients, no value transfers, and no admin/ownership changes are included. There are no omitted, extra, or mismatched actions, and no misleading characterization of magnitude or direction. This is a clean, minimal proposal whose prose accurately summarizes its on-chain effect.
Generated by Kvorum
04Actions
- Target
- 0x3d98…cd3b
- Value
- 0 wei
- Function
- _setCollateralFactor(address,uint256)
- Arguments
{ "0": "0x6C8c6b02E7b2BE14d4fA6022Dfd6d75921D90E4E", "1": "650000000000000000" }- Calldata
- Target
- 0x3d98…cd3b
- Value
- 0 wei
- Function
- _setCollateralFactor(address,uint256)
- Arguments
{ "0": "0xB3319f5D18Bc0D84dD1b4825Dcde5d5f7266d407", "1": "650000000000000000" }- Calldata
05Tally
Summed from votes
06Voters
No votes recorded yet.
07Forum
- Risk Parameter Update - February 2021 ↗discourse · high confidence
Arguments for
- Stress tests demonstrate that BAT, ZRX, DAI, and USDC can safely support increased collateral factors even under extreme volatility scenarios comparable to March 2020.— jmo, crypto_contrarian
- Increasing collateral factors for stablecoins and small-cap assets while reducing COMP distribution speeds maintains risk neutrality by offsetting the increased leverage enabled by higher collateral factors.— jmo
- More frequent, quantitative parameter adjustments based on stress testing represent a methodological improvement for DeFi risk management.— crypto_contrarian
- Breaking up the proposal into separate smaller votes (ZRX/BAT first, then rewards, then WBTC) demonstrates responsiveness to community concerns about package deals.— jmo, rleshner
Arguments against
- Packaging collateral factor changes with COMP speed reductions in a single proposal prevents voters from expressing separate opinions on each parameter and sets a poor governance precedent.— Sirokko, getty, rleshner
- Reducing COMP distribution for DAI and USDC by 25% disproportionately harms non-recursive users while only recursive farmers can offset losses through increased leverage, making the change unfair to the broader user base.— Sirokko, getty
- The proposed changes should not proceed given the protocol's extreme velocity ($4.5B to $7.9B TVL in one month) and lack of safeguards; governance should focus on improving liquidation infrastructure first.— rleshner
- The risk analysis relies on outdated liquidity data from 2019-2020 and significantly underestimates current asset volumes, making the stress tests' conclusions questionable.— getty
- Increasing collateral factors for stablecoins during overheated market conditions and with high recursive farming volumes may not be justified despite protocol safety.— Sirokko
Unresolved concerns
- Whether the Gauntlet stress tests adequately model second-order effects such as cascading liquidations during falling prices and DAI collateralization challenges in downturns.— Pinotio.com, getty
- How price jumps and power-law price behavior (the exact conditions most likely to trigger liquidation spirals) are modeled, given reliance on Geometric Brownian Motion.— Pinotio.com
- Whether the analysis accounts for the growing sophistication and scale of liquidator infrastructure now being built as dedicated protocols and dapps.— getty
- Whether recursive borrowing, while not systemic risk to the protocol, should be encouraged through higher collateral factors given it provides limited value.— Sirokko
Notable participants
- jmoGauntlet representative proposing the risk parameter changes and defending the stress-test methodology and risk-neutral incentive framework.
- SirokkoCommunity member who led sustained substantive criticism of the packaging strategy and the unfair distribution of COMP rewards across user types.
- rleshnerProtocol founder who endorsed the methodology but urged caution, advocating for smaller, sequential changes and infrastructure improvements before increasing risk.
- gettyGovernance participant who questioned data currency and expressed skepticism about the sufficiency of evidence for the proposed changes.
- Pinotio.comTechnical analyst who raised detailed questions about convexity, second-order liquidation effects, and model assumptions.
Generated by Kvorum
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