# Gauntlet Recommendations: Inter Protocol - New Mint Limit stATOM (12/04/23)

**URL:** <https://community.agoric.com/t/gauntlet-recommendations-inter-protocol-new-mint-limit-statom-12-04-23/558>\
**Category:** Inter Protocol\
**Created:** [December 4, 2023, 8:06pm UTC](https://community.agoric.com/t/gauntlet-recommendations-inter-protocol-new-mint-limit-statom-12-04-23/558 "2023-12-04T20:06:09Z")\
**Posts on this page:** 2\
**Page:** 1

<div class="post-metadata">

**Author:** ![Gauntlet](https://sea1.discourse-cdn.com/flex019/user_avatar/community.agoric.com/gauntlet/32/261_2.png) [@Gauntlet](https://community.agoric.com/u/Gauntlet)\
**Post date:** [December 4, 2023, 8:06pm UTC](https://community.agoric.com/t/gauntlet-recommendations-inter-protocol-new-mint-limit-statom-12-04-23/558/1 "2023-12-04T20:06:09Z")

</div>

## Background

Gauntlet provides the following options to the Inter Protocol to adjust the risk parameters for stATOM, based on the latest liquidity data.

### Option 1

- Increase the Mint Limit for stATOM to $1MM

### Option 2

- Increase the Mint Limit for stATOM to $1.5MM

### Option 3

- Increase the Mint Limit for stATOM to $2MM

## Analysis

At Gauntlet, we previously recommended conservative parameters for the launch of stATOM. This allowed liquidity to flow into the contracts before increasing risk thresholds.

The stATOM vaults now have ~$495k minted IST with an average collateralization ratio of 295%. Gauntlet recommends three options for updating the mint limit for stATOM to drive more capital into the Inter protocol.

## Analysis

**Markets**

**Major markets for stATOM**

| Markets | Liquidity (USD) | 10% Depth (USD) | 2% Depth (USD) |
| --- | --- | --- | --- |
| Osmosis ATOM/stATOM | $17MM | $1.05MM | $800k |
| ShadeSwap ATOM/stATOM | $450K | $50K | $20K |

## Recommendations

The on-chain liquidity has increased substantially after the initial launch of the token. Based on a 10% depth number of $1.05MM currently in Osmosis. We have three options for the mint limit recommendations: $1MM, $1.5MM, and $2MM.  
Since the price impact of 10% is around $1MM, going with a mint limit of $1MM could result in the lowest potential insolvency when we experience a severe price drawdown. The insolvency amount could be exacerbated if the liquidation exceeds the pool liquidity and causes further price drawdown.

The Insolvency based on Different Price Drawdowns

 ![HJxVNj9N6](https://us1.discourse-cdn.com/flex019/uploads/agoric1/original/1X/136752524a6ff13d150d1a3b8d975ce08d702ba8.png)

The Liquidations based on Different Price Drawdowns

 ![SkJQMT5NT](https://us1.discourse-cdn.com/flex019/uploads/agoric1/original/1X/b3ccaf66a6d0966ad56059eafbf642a33f1d5600.png)

## Parameters

### Option 1

- Increase the Mint Limit for stATOM to $1MM

This option’s potential insolvency for a 55% price drawdown is $24k. The total liquidation at this drawdown is around $700k. The insolvency for a 60% drawdown spikes to $100K with a liquidation of $670K.  
Based on the liquidity available in the Osmosis DEX, a liquidation of $700K would not cause a significant price impact (\<2%).

### Option 2

- Increase the Mint Limit for stATOM to $1.5MM

This option’s potential insolvency for a 55% price drawdown is ~$27k. The total liquidation at this drawdown is around $1.1MM. The insolvency for a 60% drawdown spikes to ~$100k with a liquidation of $1MM.  
Based on the liquidity available in the Osmosis DEX, a liquidation of $1MM can result in a price impact of 10%.

### Option 3

- Increase the Mint Limit for stATOM to $2MM

This option’s potential insolvency for a 55% price drawdown is ~$35k. The total liquidation at this drawdown is around $1.5MM. The insolvency for a 60% drawdown spikes to ~$190k with a liquidation of $1.3MM.  
Based on the liquidity available in the Osmosis DEX, a liquidation more significant than $1MM can result in a price impact greater than 10%. This could cause considerable price slippage in the DEX.

Gauntlet suggests a $1.5MM Mint Limit based on the current liquidity available in the pool. This ensures that the lower collateralized positions can be liquidated safely in a severe market downturn and minimize insolvencies. Since slippage could be relatively high for liquidating significant positions of stATOM, a mint limit of $1.5MM reduces the potential price impact in a market downturn. This recommended mint limit minimizes losses in an infinite mint attack (and other attacks like oracle manipulation).

_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_

---

<div class="post-metadata">

**Author:** ![tsunami11](https://sea1.discourse-cdn.com/flex019/user_avatar/community.agoric.com/tsunami11/32/311_2.png) [@tsunami11](https://community.agoric.com/u/tsunami11)\
**Post date:** [December 11, 2023, 7:17am UTC](https://community.agoric.com/t/gauntlet-recommendations-inter-protocol-new-mint-limit-statom-12-04-23/558/2 "2023-12-11T07:17:53Z")

</div>

The Economic Committee has been actively monitoring the growing demand for stATOM and has raised the mint limit to $2m. At the time of writing it has a utilisation rate of 27.09%. We will continue to monitor the performance of stATOM vaults.