[NIP-59] - Update minimum collateral ratios (Arbitrum)

Summary

We propose lowering the minimum collateral ratios for ETH, WBTC, and Liquid Staking Derivatives (wstETH, rETH, cbETH). This will make it more capital efficient for borrowers using Notional V3 on Arbitrum and will make Notional more competitive against other lending protocols like Aave and Compound. This proposal will also make minimum collateral ratios in line with Notional V3 Mainnet.

Proposal

We propose increasing the collateral haircuts and lowering debt buffers for ETH, WBTC, and Liquid Staking Derivatives (wstETH, rETH, cbETH) thereby lowering the minimum collateral ratios (increasing the max LTVs) at which users can borrow on Notional V3 Arbitrum:

Current Parameters

Haircut Buffer Liquidation Discount Min Collateral Ratio (USDC Debt) Min Collateral Ratio (USDC Collateral)
ETH 81% 124% 106% 135% 135%
WBTC 81% 124% 107% 135% 135%
wstETH 78% 129% 106% 140% 140%
rETH 76% 129% 107% 143% 140%
cbETH 78% 129% 107% 140% 140%

Proposed Parameters

Haircut Buffer Liquidation Discount Min Collateral Ratio (USDC Debt) Min Collateral Ratio (USDC Collateral)
ETH 87% 120% 105% 125% 130%
WBTC 84% 120% 105% 130% 130%
wstETH 83% 120% 106% 131% 130%
rETH 83% 120% 106% 131% 130%
cbETH 83% 120% 106% 131% 130%

Resources