Compound

Simple Summary

A proposal to adjust three (3) total parameters across three (3) Compound assets.

Background

This proposal is a batch update of risk parameters to align with the Moderate risk level chosen by the Compound community. These parameter updates are the fifth of Gauntlet’s regular parameter recommendations as part of Dynamic Risk Parameters.

Full proposal and forum discussion

Motivation and Specification

This set of parameter updates seeks to level set assets to a Moderate risk level of the protocol while making risk trade-offs between specific assets. Note that some are different from the original risk level consensus check as market conditions have changed.

Dashboard

Gauntlet has launched the Compound Risk Dashboard. The community should use the Dashboard to better understand the updated parameter suggestions and general market risk in Compound.

As shown below, VaR has increased considerably since our last recommendations, up to over $1B. This is mostly due to increased market volatility and lower collateralization ratios amongst the top borrowers. We note however that all the VaR is projected to be liquidations that can be safely absorbed by the market. This new set of parameter updates will slightly increase VaR, but meaningfully increase borrow usage and long-term reserves.