Moonwell

Summary

Following up on the launch of native Base USDC on September 5th, we propose onboarding USDC as a collateral asset on Moonwell’s Base deployment.

Due to the market demand and rapid increase in USDC liquidity on Base, we think it appropriate to list the asset as collateral.

Recommendations

We propose launching USDC as collateral with the following parameters:

Asset	CF	Supply cap	Borrow cap	IRM	Oracle	Protocol seize share
USDC	0.8	10M	5M	Stable	Chainlink USDC / USD	30%

Utilization	Borrow rate	Supply rate
Base utilization (0%)	0%	0%
Kink utilization (80%)	4%	2.4%
Max utilization (100%)	56%	40.5%

Analysis

KPIs for native USDC on Base, with DAI and USDbC as comparison (as of Sept 6 2023).

Asset	Total supply (Base)	Circulating supply (Base)	Circulating supply (all chains)	Bridge	-5% liquidity depth (to ETH)
USDC	152M	50M	26B	-	$1.2M
USDbC	121M	121M	26B	Base	$1.35M
DAI	24M	23.7M	3.9B	Base	$1M

DEX liquidity for USDC is currently highly concentrated in Curve 4pool. The pool currently holds over 90% of USDC DEX liquidity on Base. Furthermore, top 10 LPs on Curve 4pool hold ~60% of the liquidity.

Given these observations, we propose initializing the USDC market with conservative supply and borrow caps as a preventive measure. Caps may be adjusted shortly after launching the market once more pools are bootstrapped with substantial liquidity. Note that the Cap Guardian role allows adjusting the caps without being subject to standard 3-day voting period + timelock.

Here are the proposed caps for USDC, along with current caps for other stable markets as a matter of comparison.

Market	Supply cap	Borrow cap
USDC (proposed)	10M	5M
USDbC	40M	32M
DAI	10M	5M

Deployment

We also 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