Context & Motivation
With the introduction of Native USDC rewards for the Native USDC market (via discussion here and subsequent tally vote here) and ever changing market dynamics, it is important to frequently re-assess market parameters on Seamless Protocol.
As such, a broad examination and update to market supply and borrow caps would be great to have (and also have frequently given current market conditions).
Additionally, a specifically pressing matter is the Native USDC market that has now met supply caps. With the growing transition of USDbC to Native USDC and the introduction of aforementioned Native USDC rewards, it would be prudent to re-examine these caps and identify if they can be lifted to facilitate the transition of USDbC to Native USDC and growth of the protocol.
In conjunction with advisory/consulting (offchain) of professional risk service providers, community contributors have crafted the following proposal.
Proposal:
Supply Caps
USDbC
No change
Native USDC
Raise from 2.7M to 8M
wstETH
Raise from 400 to 800
Borrow Caps
USDbC
Raise from 10M to 15M
Native USDC
Raise from 2.5M to 6M
wstETH
Raise from 40 to 400
Specifications/Technicals
Given the potential for the Native USDC rewards on the Native USDC market to have limited growth impact, and the timing of these rewards to begin sometime tomorrow, it is suggested this proposal is also given urgency and the community utilizes the fast track procedure.
Detailed technical specifications will be provided shortly or via the onchain payload for the community to review while voting if the fast track procedure is accepted (via affirmative posts from the active community members on the forum).
Look forward to further community thoughts on this one!
Given the expansion of level 2 members, which were defined in the original fast track proposal as “active dao members” - I suggest we can apply a similar logic of 5 of 6 responses in favor to consider the proposal eligible for fast track.
This is a good call - I support a fast track on this. The Native USDC supply market should increase to make room for new Native USDC that would enter as a result of the incentives.
I support this proposal and support fast tracking it.
Considering the importance of the Seamless Protocol to the Base network as well as the deep pools in USDbC it’s critical to maintain the leading edge in terms of borrowing and lending depth. The transition Base wide from USDbC to USDC is something that Seamless needs to get in front of now.
Keeping the USDbC on the supply side in place while increasing the borrow depth of USDbC should service users in the current environment on that asset. Expanding the USDC borrow and lending pools should put Seamless on a safe but usable growth trajectory for the USDC pool. USDC pool growth is needed now and in the future so fast tracking this proposal is the appropriate step. I’d expect additional expansions to follow soon for USDC.
Thanks OP, agree with these proposed cap adjustments. I had noticed that supply caps were completely full on Native USDC with the rewards coming out and natural transition from USDbC to USDC.
Appreciate you laying these out while consulting with the risk service providers. Scalable growth to offer new users an ability to enter these markets
Considering the rapid expansion of markets within the base ecosystem, we support increasing caps to support protocol for USDC, USDbC, and wstETH as proposed.
USDC
The majority of USDC supply is used together with WETH and USDbC to borrow the same assets, making the position exposure very low. This is also the most significant borrow position of USDC. Therefore, we do not identify high risk in increasing supply cap to 8M and the borrow caps to 6M.
As there was previously limited demand for native USDC, we did not recommend an increase at the time. However, with the recent introduction of native USDC rewards, which has led to a supply cap utilization of 100%, it has become viable.
wstETH
Given the liquidity levels observed for stETH on Base and the expected use of wstETH supply for looping against ETH, which are expected to create delta neutral positions, we support the increase of the supply cap to 800. We do not identify any additional risk in increasing the borrow caps to 400.
A single delta-neutral USDbC position constitutes 75% of all borrows, with the remaining positions also primarily engaged in delta-neutral farming strategies.
Based on the current distribution of USDbC collateral utilization and the availability of liquidity on decentralized exchanges, we support increasing the Borrow Cap from 10M to 15M.
