Proposal to increase daily borrow limit for wETH and stETH markets on FiRM

1

Background

Inverse Finance’s Risk Working Group (RWG) has recently approved increasing the daily borrow limits of the wETH and stETH markets to $250k. These two markets have been active without a hiccup for long enough a period to be considered for this upgrade.

Since launch, on December 16th, 2022 via Proposal #74, FiRM has been operating flawlessly in “guarded mode” with three markets and a limited amount of DOLA available to borrow. A DOLA lending supply cap is continuously monitored by the RWG and expansions or contractions are always considered in relation to DOLA circulating supply and liquidity. Each market can also count on a daily borrow limit, with wETH and stETH limits currently set at $100k per day, and gOHM at $250k.

Motivation

Each new market deployed on FiRM is introduced in a ‘safeguarded’ mode during an initial trial period. This translates to, amongst other things, launching with reduced collateral factors and ‘lower’ daily borrow limits and evaluating the progression of the market over time. Daily borrow limits serve an important role in significantly limiting any potential exploit to the protocol and potential loss of user funds.The Inverse Finance team continuously evaluates FiRM’s and DOLA’s performance and the RWG deems that increased daily borrowing limits are acceptable for the WETH and stETH markets.

The increase in daily borrow limit for wETH and stETH markets on FiRM will provide several benefits to users and the protocol, including:

  1. Improved borrowing capacity: The higher daily limit will allow users to borrow more DOLA at once, which will enable them to more readily take advantage of DeFi opportunities and strategies. This will ultimately exclude fewer well funded depositors.
  2. Increased protocol usage: The higher daily limit will attract more users to the FiRM protocol, leading to increased usage.
  3. Better alignment with market demand: The increase in daily borrow limit will better align the protocol’s capabilities to respond to increasing borrowing demand in the DeFi ecosystem.

This increase is an important step towards building out FiRM to be a protocol appealing to a wider audience.

On Chain

  • Set FiRMstETHMarket Daily Borrow Limit to 250,000 DOLA
  • Set FiRMwETHMarket Daily Borrow Limit to 250,000 DOLA