Moonwell

Summary

We propose onboarding DAI as a collateral asset on Moonwell’s Base deployment. Due to the market demand and rapid increase in DAI liquidity on Base we think it appropriate to list the asset as collateral.

Recommendation

We propose launching DAI as collateral with the following parameters:

Asset	CF	Supply cap	Borrow cap	IRM	Oracle	Protocol seize share
DAI	0.8	6M	5M	Stable	Chainlink DAI / USD	30%

We propose to set DAI’s interest rate curve parameters to the stable IRM configuration.

Stable IRM Parameter	Value
Base rate	0
Multiplier	0.05
Kink	0.8
Jump multiplier	2.5
Reserve factor	0.15

Utilization	Borrow rate
Base utilization (0%)	0%
Kink utilization (80%)	4%
Max utilization (100%)	56%

Analysis

KPIs for Dai on Base, with USDbC as comparison (as of August 15 2023)

Asset	Circulating supply (Base)	Circulating supply (all chains)	Bridge	-5% liquidity depth (to ETH)
DAI	15M	4B	Base (Native)	$384k

Given the significant difference in on-chain liquidity of DAI vs USDbC, we recommend scaling the supply and borrow caps for DAI to around ⅛ of those of USDbC.

Market	Supply cap	Borrow cap
DAI	6M	5M
USDbC	40M	32M

Deployment

We strongly recommend collateral factors to be set at 0 during deployment to mitigate the risk of someone exploiting a known Compound v2 issue (see Hundred Finance exploit). Steps for safe deployment as proposed by Hexagate are the following:

• Initialize markets using 0 as collateral factor (no borrowing possible).
• Burn a small amount of collateral token supply for each market.
• Set collateral factors for each market as specified

References

DAI → USDbC Liquidity profile

USDbC → DAI Liquidity profile

DAI → WETH Liquidity profile

WETH → DAI Liquidity profile