Introduction
The objective of this post is to present the results of the Deposit Caps Methodology run as of September’24, compare them to the current caps on Mars for Osmosis and Neutron and offer some suggestions based on these results.
We’re looking into performing this exercise once every 1-3 months and present the results and recommendations to the community for further discussion.
Results and Suggestions for Osmosis
The following table summarizes the caps suggested by the methodology (including both the Red Bank and Farm) for Osmosis and compares them against the current caps (all numbers in the table are in dollars):
In the table above, the Final Max. Cap is the minimum between the Expert Max. Cap (which represents the maximum limit determined by the on-chain liquidity) and the Framework Max. Cap, which represents the cap according to the simulation methodology (see Deposit Caps Methodology).
Also note that we increased Expert Max. Cap up to 100%-150% of 90-day median on-chain liquidity (previously used level is 30%). The motivation is that, from a risk perspective, the most important are the caps derived from simulations of various price change scenarios (including extreme ones) and account snapshots, while expert-based caps are more advisory.
Based on the simulation results and taking into account the current caps and ongoing deposit incentives, the table below provides the proposed actions and new caps for each asset:
As can be seen, for many tokens, it is recommended to reduce the caps which is due to the general trend of decreasing liquidity on Osmosis (see figure in Appendix).
Note that for some tokens the proposed cap is still above the recommended one, namely for ATOM, stATOM, WBTC, WBTC.axl, and stTIA. We propose to reduce the caps gradually monitoring if liquidity continues to decline.
We propose to increase the caps for some assets with a 100% filled cap if the cap has not reached the maximum allowed, namely, for DYDX, stDYDX, and stOSMO.
Summary for Osmosis:
We propose to decrease the deposit caps for the following assets:
We propose to increase the deposit caps for the following assets:
Note that for some tokens the proposed caps are not equal to the maximum ones. We propose to increase the caps gradually, while monitoring liquidity, users’ interest, and the state of the protocol. When the caps for these tokens are close to full, the methodology can be run again and the possibility of increasing the caps can be reconsidered.
Results and Suggestions for Neutron
The following table summarizes the caps suggested by the methodology for Neutron chain (including both the Red Bank and Farm) and compares them against the current caps (all numbers in the table are in dollars):
The current cap exceeds the cap suggested by the methodology for the following assets:
- WETH.axl ($525k Current Cap vs. $258k Final Max. Cap)
- stTIA ($165k Current Cap vs. $61k Final Max. Cap)
The following proposals are made:
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For WETH.axl there is a governance proposal [MRC-121] published on the forum recently to decrease the cap to $250k (from 200 to 100 WETH.axl), so the resulting cap will be in line with the one proposed by the methodology.
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For stTIA we propose to decrease the cap from $165k to $60k (from 25,000 to 10,000 stTIA). There are Stride incentives for this token which provide ~9% APY, however, the utilization is low (<3%) indicating low user interest in this asset.
The table below provides the list of assets for which the current utilization is high (% Used is more than 80%) and the Current Cap is significantly below the Final Max. Cap, so there is some space to increase the caps:
The following proposals are made:
- For ATOM we propose to increase the cap from 250,000 to 350,000 ATOM, while the overall cap (Red Bank and Farm) will be increased up to $2M.
- For DYDX we propose to increase the cap from 10,000 to 26,000 DYDX (up to $25k).
- For wstETH we suggest not changing the cap for individual token for now, because we whitelist wstETH/WETH.axl LP token as collateral and related HLS (see governance proposal [MRC-121]), which leads to the overall cap increase.
Summary for Neutron:
The following changes are proposed for Neutron chain:
Appendix: Historical Liquidity for Osmosis
Data souse: Prod - Osmosis Historical Data - Swagger UI
Copyright
Copyright and related rights waived via CC0.
Disclaimers/Disclosures
This proposal is being made by Mars Protocol Foundation, a Cayman Islands foundation company. Mars Protocol Foundation engages in research and development of the Mars Protocol. Mars Protocol Foundation and certain of its service providers and managers own MARS tokens and have financial interests related to this proposal. The aforementioned persons or their affiliates may also have financial interests in complementary or competing projects or ecosystems, entities or tokens, including MARS, NTRN, and OSMO. These statements are intended to disclose relevant facts and to help identify potential conflicts of interest, and should not be misconstrued as a complete description of all relevant interests or conflicts of interests; nor should they be construed as a recommendation to purchase or acquire any token or security.
This proposal is also subject to and qualified by the Mars Disclaimers/Disclosures. Mars Protocol Foundation may lack access to all relevant facts or may have failed to give appropriate weighting to available facts. Mars Protocol Foundation is not making any representation, warranty or guarantee regarding the accuracy or completeness of the statements herein, and Mars Protocol Foundation shall have no liability in the event of losses or damages ensuing from approval or rejection or other handling of the proposal. Each user and voter should undertake their own research and make their own independent interpretation and analysis of all relevant facts and issues to arrive at their own personal determinations of how to vote on the proposal.