Introduction
The objective of this post is to present the results of the Deposit Caps Methodology run as of December’24, compare them to the current caps on Mars for Osmosis and Neutron and offer some suggestions based on these results.
Also note that in this launch we relaxed the following Deposit Cap model parameters since using over conservative parameters can lead to undervalued caps:
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Expert Max. Cap is increased up to 100%-150% of current 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.
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Bad debt tolerance threshold is increased from $0 to $5k (which is much below than the insurance fund reserves).
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On-chain depth is increased by 1.5x (expertly determined parameter). The motivation is that the framework conservatively assumes that all pools are xyk-type whereas most pools are CL-type with the depth much greater than the xyk one. We plan to conduct a more precise calibration of this multiplier in the future.
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For the Osmosis chain, alloyed pools liquidity is added to the single-bridge asset liquidity.
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Price volatility stress factor is set to 1 (previously used level is 1.2), i.e. the volatility is calibrated from historical data without adding more stress to the data.
Note that there is still a fairly large conservatism buffer for the caps because we assume caps for all assets are increased simultaneously up to the maximum cap allowed, whereas we usually increase caps for few assets only.
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 token amounts):
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).
Based on the simulation results and taking into account the current caps, the table below provides the proposed actions and new caps for each asset:
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 (including both the Red Bank and Farm) for Neutron and compares them against the current caps (all numbers in the table are in token amounts):
Based on the simulation results and taking into account the current caps, the table below provides the proposed actions and new caps for each asset:
Note that in the framework, LP tokens are split into individual assets in a 50/50 ratio and the cap for a single token is increased by the corresponding amount. Hence, the methodology determines the total cap (Red Bank + Farm) for each asset. When increasing the cap for LP token, we ensure that the resulting total cap for each asset does not exceed the recommended maximum cap.
Summary for Neutron:
We propose to increase the deposit caps for the following assets:
Copyright
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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.