Summary
Due to high demand for the ezETH/ETH leveraged vault, we propose increasing the vault’s maximum pool share parameter from 20% to 35%. The Notional leveraged vault currently holds ~20% of the total amount of ezETH/ETH Balancer Pool Tokens (BPTs). In order to allow new users to enter the vault we propose increasing the maximum pool share parameter to 35%.
Risks
Increasing the maximum pool share implies that the protocol will accept a higher proportion of total on-chain ezETH liquidity. There is some ezETH liquidity outside of Balancer on Ethereum Mainnet, but Balancer is the primary source. This does create risks, but those risks are mitigated by the fact that ezETH has redemptions enabled.
Because of the redemption functionality, we can expect that any depegs will be temporary. In addition to that, max leverage on this vault is conservative at 7.14x. This implies an LTV of ~0.88. With an LTV of 0.88 and a 3% liquidation discount, Notional can withstand a minimum 11% drop in ezETH before any potential insolvency. This provides a significant buffer and suitably mitigates the risk of taking on a larger percentage of on-chain ezETH liquidity.