Summary
We propose to increase supply caps on Arbitrum in preparation for the upcoming launch of Notional V3.
| Currency | Current Supply Caps | Proposed Supply Caps |
|---|---|---|
| ETH | 300 ETH (~$480,000) | 3,000 ETH (~$5,000,000) |
| USDC | 500,000 USDC (~$500,000) | 5,000,000 USDC (~$5,000,000) |
| DAI | 250,000 DAI (~$250,000) | 5,000,000 DAI (~$5,000,000) |
| wstETH | 150 (~$270,000) | 1,400 wstETH (~$2,500,000) |
| FRAX | 250,000 FRAX (~$250,000) | 2,500,000 FRAX (~$2,500,000) |
| WBTC | 9 WBTC (~$260,000) | 80 WBTC (~$2,500,000) |
| USDT | 250,000 USDT (~$250,000) | 1,000,000 USDT (~$1,000,000) |
| cbETH | N/A | 650 cbETH (~$1,000,000) |
| rETH | 150 rETH (~$250,000) | 300 rETH (~$500,000) |
| GMX | N/A | 14,000 GMX (~$500,000) |
Context and objective
Notional V3 will officially launch on Arbitrum on November 1st. As part of the launch, we propose to increase supply caps in order to allow LPs and lenders to deposit larger amounts of capital on Notional. This proposal is important given the proposal to increase incentives on Arbitrum.
Supply caps can always be adjusted in the future as demand changes and as market conditions (liquidity, volatility) evolve.
Proposal
ETH - USDC - DAI
We propose setting the supply caps for ETH, USDC, and DAI to ~$5M initially. These assets benefit from deep liquidity on Arbitrum and have historically been in high demand on Notional’s mainnet deployment. If demand for these assets ever approaches the $5M supply caps, they could be raised again by governance.
wstETH - FRAX - WBTC
We propose listing wstETH, FRAX, and WBTC with initial supply caps of ~$2.5M due to slightly lower liquidity on Arbitrum. As demand and liquidity for these assets increase supply caps could be increased by governance.
USDT
We propose setting an initial supply cap of $1M for USDT. USDT is listed as a collateral asset on Notional’s Arbitrum deployment. In order to mitigate the protocol’s exposure to a potential depeg we propose setting the supply cap at $1M initially and re-evaluating the cap over time as the DAO gets a better sense of user demand for USDT on Notional.
rETH
We propose setting an initial supply cap of $500,000 for rETH. Although liquidity for rETH on Arbitrum is sufficient to list rETH with a higher supply cap, rETH’s chainlink oracle on Arbitrum is a custom oracle that only records the rETH/ETH exchange rate without considering rETH’s market price. This oracle would therefore not capture potential rETH market price decreases and would assume that the market price of 1 rETH is always equal to the rETH exchange rate with no consideration for rETH’s on-chain trading price. The supply cap for rETH could be updated if Chainlink eventually offers a price feed that looks at rETH market price.
cbETH - GMX
See cbETH and GMX onboarding risk assessments for the rational behind the proposed supply caps.