Summary
We propose increasing Notional’s Arbitrum Prime ETH, Prime USDC, Prime wstETH, Prime rETH, Prime FRAX, and Prime USDT supply caps to facilitate growth on Arbitrum.
Proposal
Supply cap utilization has reached 68% for ETH, 73% for USDC, and 98% for USDT on Arbitrum following the launch of Notional’s STIP Arb incentives. Supply cap utilization can be tracked here. To facilitate the growth of the protocol we propose increasing the Prime ETH, Prime USDC, and Prime USDT supply caps according to the following table:
| Supply caps | Current | Proposed | Utilization (current) | Utilization (proposed) |
|---|---|---|---|---|
| ETH | 3,000 | 7,500 | 68.07% | 27.22% |
| USDC | 5,000,000 | 10,000,000 | 72.80% | 36.40% |
| wstETH | 1,400 | 3,000 | 51.58% | 24.07% |
| rETH | 1,000 | 2,500 | 77.43% | 30.97% |
| FRAX | 2,500,000 | 5,000,000 | 72.23% | 36.12% |
| USDT | 1,000,000 | 3,000,000 | 97.97% | 32.66% |
Risks
By increasing supply caps, the protocol will effectively take more risk by allowing more ETH, USDC, wstETH, rETH, FRAX, and USDT to be used as collateral.
Arbitrum on-chain liquidity for USDC, USDT, FRAX, rETH, wstETH, and ETH currently allows liquidators to liquidate collateral assets with relatively minimal slippage thereby mitigating liquidity concerns. Additionally, the majority of Notional’s debts are collateralized by assets in the same currencies (ex: prime USDT debts collateralized by nUSDT) mitigating potential cross-currency risks.