KVORUM
compoundSource: Compound governor oz · #426

[Gauntlet] Risk Parameter Recommendations (02/2025) - V3 Ethereum USDS & V3 Arbitrum USDC/USDT & V3 Polygon USDC/USDT

executedApr 12, 2025, 10:05 AM UTCby7B0x7b3c…cc33

01Summary

AISummary by Kvorumclaude-haiku-4-5

Gauntlet recommends adjusting liquidation and collateral risk parameters for WETH and wstETH across Ethereum V3 USDS and Arbitrum/Optimism/Polygon V3 USDC/USDT markets. Changes include increasing liquidation penalties from 5% to 7%, decreasing liquidation factors from 90% to 88%, and reducing collateral factors (WETH from 85% to 83% and wstETH from 82% to 80%) to create a strategic buffer and improve risk management following the February 3, 2025 market downturn.

Type
parameter change

Key changes

  • Increase liquidation penalty for WETH from 5% to 7% on V3 Arbitrum, Optimism, and Polygon markets(medium)
  • Decrease liquidation factor for WETH from 90% to 88% on V3 Arbitrum and Optimism markets(medium)
  • Decrease WETH collateral factor from 85% to 83% on V3 Arbitrum USDT market(medium)
  • Decrease wstETH collateral factor from 82% to 80% on V3 Ethereum USDS market(medium)
  • Create strategic buffer between liquidation penalty and liquidation factor to prevent extended unsold collateral periods(high)

Notable concerns

  • Changes motivated by extended collateral liquidation delays observed during February 3, 2025 market downturn where WETH and wstETH remained unsold for extended periods
ContractsV3 Ethereum USDSV3 Arbitrum USDC/USDTV3 Optimism USDC/USDTV3 Polygon USDC/USDTConfigurator
Generated by Kvorum
model: claude-haiku-4-5
provider: anthropic
profile: anthropic-fast-v1
prompt: v1.0
generated: 2mo ago
Read the description ↗

02Description

281 words

[Gauntlet] Risk Parameter Recommendations (02/2025) - V3 Ethereum USDS & V3 Arbitrum USDC/USDT & V3 Polygon USDC/USDT

Simple Summary

Specification

Liquidation Penalty

CometAssetParameterCurrent ValueRecommended Value
V3 Arbitrum USDC/USDTWETHLiquidation Penalty5%7%
V3 Optimism USDC/USDTWETHLiquidation Penalty5%7%
V3 Polygon USDC/USDTWETHLiquidation Penalty5%7%

Liquidation Factor

CometAssetParameterCurrent ValueRecommended Value
V3 Arbitrum USDC/USDTWETHLiquidation Factor90%88%
V3 Optimism USDC/USDTWETHLiquidation Factor90%88%

Collateral Factor

CometAssetParameterCurrent ValueRecommended Value
V3 Arbitrum USDTWETHCollateral Factor85%83%
V3 Ethereum USDSwstETHCollateral Factor82%80%

Motivation

During the market downturn on February 3, 2025, WETH and wstETH collateral remained unsold for extended periods before being liquidated. We advise that Compound introduce a strategic buffer between its Liquidation Penalty (LP) and Liquidation Factor (LF). This buffer not only safeguards users from sudden penalties but also contributes to a more robust risk management framework for Compound.

Full proposal and forum discussions can be found in this post.

Specification

The proposal updates the parameters by using the respective methods on the Configurator.

By approving this proposal, you agree that any services provided by Gauntlet shall be governed by the terms of service available at gauntlet.network/tos

03Mismatch analysis

AIMismatch analysis by Kvorum

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

04Actions

5 total
#0updateAssetBorrowCollateralFactor(address,address,uint64)chain 0x1
Target
0x316f…36e3
Value
0 wei
Function
updateAssetBorrowCollateralFactor(address,address,uint64)
Arguments
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Calldata
#1deployAndUpgradeTo(address,address)chain 0x1
Target
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Value
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Function
deployAndUpgradeTo(address,address)
Arguments
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Calldata
#2sendMessageToChild(address,bytes)chain 0x1
Target
0xfe5e…89a2
Value
0 wei
Function
sendMessageToChild(address,bytes)
Arguments
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Calldata
#3sendMessage(address,bytes,uint32)chain 0x1
Target
0x25ac…5fa1
Value
0 wei
Function
sendMessage(address,bytes,uint32)
Arguments
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Calldata
#4createRetryableTicket(address,uint256,uint256,address,address,uint256,uint256,bytes)chain 0x1
Target
0x4dbd…ab3f
Value
5013242000000000 wei
Function
createRetryableTicket(address,uint256,uint256,address,address,uint256,uint256,bytes)
Arguments
{
  "to": "0x42480C37B249e33aABaf4c22B20235656bd38068",
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}
Calldata

05Tally

Summed from votes

Voters0
VP participating0
Outcome (current)—
Current support—

06Voters

0 total

No votes recorded yet.

07Forum

AIForum synthesis by Kvorumclaude-haiku-4-5
sentiment · favorablethread · constructive

Arguments for

  • The February 3, 2025 market downturn revealed that WETH and wstETH collateral experienced delayed liquidation and prolonged absorption, necessitating parameter adjustments to improve liquidation efficiency.— Gauntlet
  • Increasing liquidation penalties (WETH to 7%, wstETH to 10%) and reducing liquidation factors (WETH to 88%, wstETH to 85%) will create a strategic buffer that protects users from sudden penalties while strengthening Compound's risk management framework.— Gauntlet
  • Data analysis shows sufficient liquidity in WETH and wstETH trading pairs across DEXs to support the recommended parameter changes without creating liquidation execution problems.— Gauntlet

Arguments against

None surfaced.

Notable participants

  • GauntletProposer of risk parameter recommendations based on February 3, 2025 market downturn analysis.
Generated by Kvorum
model: claude-haiku-4-5
provider: anthropic
profile: anthropic-fast-v1
prompt: v1.0
generated: 2mo ago
Open the thread ↗