Summary
This proposal seeks to increase the daily borrow limit of FiRM’s wstETH market to 500,000 DOLA. Initially set at a conservative 200,000 DOLA, the daily borrow limit for wstETH is now poised for revision based on prior analyses and the conclusion of the market’s guarded launch phase.
Background
In our continuous efforts to enhance the appeal and functionality of FiRM as a premier lending platform, the Risk Working Group (RWG) plays a pivotal role in recommending adjustments to various market parameters. Such adjustments can include updates to collateral factors, daily borrow limits, liquidation factors, and supply ceilings, to name a few. The RWG conducts thorough risk assessments, studying on-chain data to ensure that these changes balance the dual objectives of attracting new users and safeguarding the platform’s stability and security.
Overview
The initial setting of the wstETH market’s daily borrow limit at 200,000 DOLA was a conservative measure to mitigate risks during its introduction. Now, with sufficient market data and stability demonstrated during the guarded launch phase, an increase to 500,000 DOLA is deemed appropriate. This adjustment reflects a comprehensive risk analysis that considers the current market liquidity, the volatility of wstETH, and the overall performance of the wstETH market on FiRM. By carefully monitoring these factors, the RWG ensures that the proposed increase maintains an acceptable risk profile while facilitating greater user engagement.
Risk Advisory from Chainlink
In the spirit of keeping our users informed about potential risks so that they can make informed decisions about their interactions with FiRM markets, we wish to disclose an advisory recently communicated by the team at Chainlink. This advisory relates to updates to their Data Feeds Categorizations, aiming to help developers better understand and mitigate market risks. Specifically, they’ve highlighted concerns related to certain assets, including STETH-USD, which is directly relevant to our wstETH market.
Chainlink’s analysis has flagged assets like STETH-USD for potential risks, including low liquidity, concentration risk, or cross-rate risk. Despite these risks, Chainlink assures that the Oracle networks for these feeds will remain unchanged, continuing to provide reliable data. They recommend implementing safeguards such as circuit breakers or manual kill switches to protect against pricing anomalies arising from these market integrity risks. More on the topic can be viewed here. For a refresher on FiRM’s safety features, be sure to refer to the RWG’s dedicated Gitbook here.
On-Chain Actions
- Set FiRMwstETHMarket Daily Borrow Limit to 500,000 DOLA