DOVU Risk Parameters Update

Request for Comment
1
  • Title: DOVU Risk Parameters Update
  • Specific Category: Bonzo Lend
  • Author(s): Bonzo Finance, Ipak Systems
  • Submission Date: 21 May 2026

Simple Summary

This change memo proposes six adjustments to the DOVU market on Bonzo Finance: raising the supply cap, raising the liquidation bonus, tightening the liquidation threshold, increasing the reserve factor, raising the borrow cap, and increasing Slope-2 in interest rate model. The proposal is grounded in DOVU’s market and liquidity characteristics and on-chain analysis of the DOVU/HBAR SaucerSwap V2 pool.

Motivation

DOVU’s market profile has evolved since the current parameters were set - liquidity, adoption, and DEX depth have all shifted. DOVU supply on Bonzo has reached the current cap, indicating rising demand to use DOVU as collateral. This memo revises the parameter set to accommodate that demand while ensuring bad-debt events are avoided: the supply cap is raised, but LTV is held low and the liquidation bonus is increased so that liquidations remain profitable under realistic conditions.

The supply cap, liquidation bonus, and liquidation threshold are calibrated jointly against the DOVU/HBAR SaucerSwap V2 pool depth, since this is the venue through which DOVU liquidations execute. Together these parameters determine the size and timing of each liquidation event, and are sized so that the resulting sale into the pool stays within absorbable slippage. The borrow cap, reserve factor, and Slope-2 adjustments support market activity and protocol cushion as DOVU TVL grows.

Supply cap, LB, and LT are derived from the pool’s slippage profile. At supply cap 31.25M DOVU, LTV 20%, and close factor 50%, the maximum single-event liquidation seizes ~4.3M DOVU. On-chain measurement on SaucerSwap V2 pool 0.0.5328590 show that liquidations will stay sustainable across realistic regimes. The LT tightens from 59% to 45% to ensure liquidations fire while the DOVU/HBAR ratio is still within or near the dense pool liquidity band, where the slippage measurement holds.

Borrow cap is raised to 15.6M DOVU to allow meaningful borrow utilization and keep the DOVU market live. The current 3.9M DOVU cap leaves the IR model inactive across realistic demand.

Slope-2 is raised from 250% to 300% to create a sharper above-kink deterrent and avoid illiquidity at high utilization, matching the KARATE tier for thin-liquidity HTS assets.

Reserve factor is raised from 17.25% to 25% to build protocol cushion more aggressively. With the supply cap raised, DOVU suppliers will earn higher interest income; a larger reserve factor captures protocol share of this growth.

Impact & Implementation

  • Supply capacity expands from 19.4M DOVU to 31.25M DOVU.

  • Liquidations remain profitable under realistic per-event conditions (3.61% net margin) and feasible under stress.

  • LT correction ensures liquidations fire while the pool can absorb them.

  • DOVU borrow market becomes active across realistic demand range.

  • Reserve growth accelerated; cushion builds with TVL growth.

Changes implement immediately after approval, with ongoing HF distribution and pool depth monitoring.

Specification

Parameter Current Recommended
Supply Cap 19,379,844 DOVU 31,250,000 DOVU
Liq Threshold 59% 45%
Liq Bonus 6.66% 10%
Borrow Cap 3,875,968 DOVU 15,625,000 DOVU
Reserve Factor 17.25% 25%
Slope-2 (γ) 250% 300%
LTV 20% 20%

Close Factor 50% 50%

3 Likes
DOVU Risk Parameter Update
2

Thanks so much @Ipak_Systems for this proposal — we’ve made available here the DOVU Risk Parameter Quantitative Analysis and the DOVU Asset Due Diligence

3

Has DOVU ever been seized in a liquidation event?

I am wondering if the cap is raised for DOVU, will that increase borrow/revenue generating activity?

Are current providers of DOVU as collateral leveraging or borrowing against their collateral?

I’m trying to gauge if raising the cap will only increase the amount of DOVU locked on the platform which increases TVL, but doesn’t increase protocol revenue.

5

Hey @StraightUpCurt — this is a great question and apologies for the delay / missing the reply.

When both the Supply and Borrow Caps are raised for DOVU, this will allow for greater amounts of DOVU to be both supplied and borrowed.

Today, the borrow cap is set to 3.9M DOVU, of which 1.2M DOVU is being borrowed (~30% utilization), and the supply cap is set to 19.4M DOVU, of which there is currently 28.5M DOVU supplied (it’s over the cap still, as folks haven’t withdrawn since the last supply cap decrease).

With a new supply cap of 31.25M and borrow cap of 15.625M — it’s expected that users will supply DOVU as collateral to borrow USDC or HBAR against, which does generate revenue for the protocol; the trend for most ecosystem / volatile assets is supplying as collateral for borrowing, with stablecoins being the most borrowed across lending protocols.

Current suppliers of DOVU are leveraging / borrowing against their DOVU assets — $28,164 of DOVU (out of the ~$32,100 DOVU supplied) is currently being utilized as collateral against active borrows in the protocol, which generates revenue.