Summary

Llama proposes upgrading the MaticX Reserve on Polygon to facilitate an expansion of the MaticX/wMATIC loop strategy.

Abstract

Utilisation of the MaticX reserve has been trending higher over time and with the introduction of deposit rewards, the SupplyCap has been reached and it now prohibites additional MaticX being deposited.

Increasing the SupplyCap enables the recursive MaticX/wMATIC strategy to grow beyond the current constraints. Enabling borrowing, with a reasonable BorrowCap and SD rewards, is expected to generate significant utilisation of the MaticX reserve.

This proposal facilitates the expansion of MaticX yield based strategies on Aave v3 Polygon by creating more favourable bootstrapping conditions. The introduction of liquidity mining rewards is expected to drive notable inflows and usage to the v3 deployment.

Motivation

Over the previous months, Llama has been working with various communities to craft favourable conditions on Aave v3 Polygon to facilitate the creation of several yield aggregation products. The below proposals details are applicable:

• Proposal to add MaticX to Aave v3 Polygon Market
• ARFC Aave v3 Polygon wMATIC Interest Rate Update
• ARFC SD Emission_Admin for Polygon v3 Liquidity Pool
• ARFC stMATIC & MaticX Emission_Admin for Polygon v3 Liquidity Pool

This proposal is a continuation of the above work.

In support of the ongoing SD rewards distribution, this proposal seeks to increase the SupplyCap, enable borrowing and introduce a BorrowCap sufficient to create a notable deposit yield.

Detailed analysis can be found on the governance forum, here.

Specification

The following risk parameters are being proposed and have been reviewed by Gauntlet.

Parameter	Current	Proposed Value
Loan To Value	50.00%	58.00%
Liquidation Threshold	65.00%	67.00%
Liquidation Bonus	10.00%	10.00%
Liquidation Protocol Fee	0.00%	10.00%
SupplyCap	6.0M units	8.6M units
Borrowing	Disabled	Enabled
BorrowingCap	0.00M units	5.20M units

With borrowing to be enabled, the following interest rate parameters have been reviewed by Llama and Gauntlet.

Parameter	Proposed Value
Base	0.25%
Uoptimal	45.00%
Slope1	4.00%
Slope2	150.00%
Reserve Factor	20.00%
Stable Borrowing	Disabled
Stable Slope1	0.50%
Stable Slope2	150.00%
Base Stable Rate Offset	2.00%
Stable Rate Excess Offset	5.00%
Optimal Stable To Total Debt Ratio	20.00%

Implementation

Test cases can be found here

Payload Implementation can be found here

New Interest Rate Strategy deployment script can be found here

Proposal Payload deployed address can be found here

Interest Rate Strategy deployed address can be found here

Security Considerations

The proposal Payload was reviewed by Bored Ghost Developing.

Governance Considerations

Aave governance forum discussion, Snapshot vote and Risk Service Provider feedback.

Copyright

Copyright and related rights waived via CC0.