Supply/Borrow Caps
This section explains what are supply/borrow caps and how it is used to protect the protocol.
In the event one of the underlying collateral collapses faster than the risk team can possibly delist or stop the borrowing of that asset, borrow/supply caps start to play a role in limiting the possible bad debt that could occur from within collateral collapse.
Borrow Caps
Borrow caps define the maximum amount of an asset which can be borrowed. Borrow caps can be used to prevent traditional and flash borrowing of an asset which may experience a price exploit and lead to protocol insolvency. A borrow cap is an optional parameter, and the value will depend on-chain liquidity of the asset and total volume of borrowed assets in the pool.
By default borrow cap of an asset is 0, which signifies no cap. Anyone who has been granted RISK_ADMIN or POOL_ADMIN role via the ACLManager can call setBorrowCap method in PoolConfigurator to update the max total borrow (stable + variable) for the given reserve.
In case the Borrow Cap of the reserve is set lower than the current totalDebt the existing borrowers are not effected but no more borrows (stable or variable) can be initiated for that reserve.
Supply Caps
Supply caps define the maximum amount of an asset which can be supplied to the protocol. Supply caps can be used to limit the protocol’s exposure to riskier assets and protect against infinite minting exploits. A supply cap is an optional parameter, and the value will depend on on-chain liquidity of the asset and total volume of collateral assets in the pool.
By default supply cap of an asset is 0, which signifies no cap. Anyone who has been granted RISK_ADMIN or POOL_ADMIN role via the ACLManager can call setSupplyCap method in PoolConfigurator to update the liquidity supply for the given reserve.
In case the Supply Cap of the reserve is set lower than the current liquidity of the reserve, the existing suppliers are not affected, but no more liquidity can be supplied to that reserve.
FAQs
How are supply/borrow caps assigned?
Governance can at any point in time appoint RISK_ADMIN and POOL_ADMIN who have the ability to configure the Borrow and Supply Caps of the individual reserves.
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