Simple Summary
Gauntlet recommends the following risk parameter and interest rate curve updates for Euler Base in order to increase capital efficiency and liquidity:
LLTVs
We recommend increasing LLTVs for WETH/USDC and WETH/USDS pairs to increase capital efficiency, given high liquidity for these assets on Base and relatively low supply caps.
| Collateral / Debt Pair | Current LLTV (%) | Recommended LLTV (%) |
|---|---|---|
| WETH / USDC | 85% | 87% |
| WETH / USDS | 85% | 87% |
Supply Caps
The supply caps for WETH, USDC, and USDS are all at > 75% utilization. In order to increase liquidity, we recommending the following cap changes:
| Asset | Current Supply (USD) | Current Supply Cap (USD) | Current Supply Cap Utilization | Current Supply Cap (Tokens) | Recommended Supply Cap (Tokens) | Recommended Supply Cap (USD) | Recommended Supply Cap Utilization |
|---|---|---|---|---|---|---|---|
| WETH | $10.70M | $13.46M | 79.3% | 5,000 WETH | 15,000 WETH | $40.38M | 26.5% |
| USDC | $15.35M | $20M | 76.8% | 20M USDC | 60M USDC | $60M | 25.6% |
| USDS | $19.50M | $20M | 97.5% | 20M USDS | 40M USDS | $40M | 48.8% |
We note that the circulating supply for USDS on Base is ~104M, and we recommend setting the supply cap to 40M (~38% of circulating supply). The fourth largest USDS holder on Base only possesses 436k USDS tokens. However, the Spark PSM currently offers $30M USDS liquidity.
Borrow Caps
We recommend aligning the borrow caps accordingly:
| Asset | Current Borrows (USD) | Current Borrow Cap (USD) | Current Borrow Cap Utilization | Current Borrow Cap (Tokens) | Recommended Borrow Cap (Tokens) | Recommended Borrow Cap (USD) | Recommended Borrow Cap Utilization |
|---|---|---|---|---|---|---|---|
| WETH | $7.09M | $11.48M | 61.8% | 4,250 WETH | 12,750 WETH | $34.43M | 20.6% |
| USDC | $12.05M | $18M | 66.9% | 18M USDC | 54M USDC | $54M | 22.3% |
| USDS | $10.91M | $18M | 60.6% | 18M USDS | 36M USDS | $36M | 30.3% |
Interest Rate Curve Recommendations
| Asset | Current Borrow APY at Kink | Recommended Borrow APY at Kink | Current Max Borrow APY at 100% Utilization | Recommended Max Borrow APY at 100% Utilization |
|---|---|---|---|---|
| USDC | 9.42% | 6.00% | 101.38% | 70.00% |
| USDS | 9.42% | 6.00% | 101.38% | 70.00% |
| WETH | 2.79% | 2.50% | 122.50% | 80.00% |
These interest rate curve recommendations align with prevailing DeFi demand. We will continue to monitor market adoption, utilization rates, interest rate curves, user demand, and community feedback, adjusting parameters as needed.
Next Steps
- Welcome feedback from the community