[Gauntlet] Risk Parameter Recommendations (02/2025) - V3 Ethereum USDS & V3 Arbitrum USDC/USDT & V3 Polygon USDC/USDT

Simple Summary

Specification

Liquidation Penalty

Comet	Asset	Parameter	Current Value	Recommended Value
V3 Arbitrum USDC/USDT	WETH	Liquidation Penalty	5%	7%
V3 Optimism USDC/USDT	WETH	Liquidation Penalty	5%	7%
V3 Polygon USDC/USDT	WETH	Liquidation Penalty	5%	7%

Liquidation Factor

Comet	Asset	Parameter	Current Value	Recommended Value
V3 Arbitrum USDC/USDT	WETH	Liquidation Factor	90%	88%
V3 Optimism USDC/USDT	WETH	Liquidation Factor	90%	88%

Collateral Factor

Comet	Asset	Parameter	Current Value	Recommended Value
V3 Arbitrum USDT	WETH	Collateral Factor	85%	83%
V3 Ethereum USDS	wstETH	Collateral Factor	82%	80%

Motivation

During the market downturn on February 3, 2025, WETH and wstETH collateral remained unsold for extended periods before being liquidated. We advise that Compound introduce a strategic buffer between its Liquidation Penalty (LP) and Liquidation Factor (LF). This buffer not only safeguards users from sudden penalties but also contributes to a more robust risk management framework for Compound.

Full proposal and forum discussions can be found in this post.

Specification

The proposal updates the parameters by using the respective methods on the Configurator.

By approving this proposal, you agree that any services provided by Gauntlet shall be governed by the terms of service available at gauntlet.network/tos

https://tally.xyz/gov/compound/proposal/426