TLDR
- WLFI collateral on Dolomite is near the 5.1B token cap across two team-linked wallets.
- Wallet 0x44a6 borrowed about $40.7M in stables against 3B WLFI.
- Wallet 0x5be9 used borrowed USD1 as collateral to borrow USDC in a loop.
- USD1 utilization reached 83.4%, while USDC utilization reached 90.19%.
- World Liberty Finance supplied 82.7% of Dolomite TVL and drove 85.3% of borrowing.
World Liberty Finance has pushed a large WLFI borrowing loop close to Dolomite’s token limit. Chaos Labs said the activity now dominates supply and borrowing on the protocol. The setup has drawn market attention because exposure sits with one main actor. It also comes as WLFI unlock discussions near a governance vote.
The reported structure uses WLFI, USD1, and USDC across two team-linked wallets. One wallet holds a simpler stablecoin loan against WLFI collateral. Another runs a loop that reuses borrowed assets as new collateral. That design has placed fresh focus on Dolomite’s concentration risk.
WLFI positions move near the collateral cap
Chaos Labs said WLFI collateral on Dolomite is close to the 5.1 billion token cap. The firm linked the activity to two team-linked wallets. Those addresses now use almost all available WLFI borrowing capacity. As a result, protocol exposure has become tightly concentrated.
Wallet 0x44a6 borrowed about $40.7 million in stables, mostly USD1. It posted 3 billion WLFI as collateral. Chaos Labs valued the collateral at nearly $242 million at the time. The figures suggest a wide gap before liquidation.
Dolomite enabled borrowing against WLFI with a 66% liquidation threshold, according to the post. Chaos Labs said the current setup points to a roughly 75% price decline before liquidation. That estimate assumes USD1 keeps its peg. Any break in that peg would change the position.
Looped stablecoin borrowing changes protocol activity
The larger position sits in wallet 0x5be9 and uses a more layered structure. It borrowed $111 million in USD1 against WLFI and USDC collateral. It also borrowed $89 million in USDC against about $110 million in USD1. The two positions connect through the same pool of borrowed assets.
Chaos Labs said borrowed USD1 from the first position supports the second position. The borrowed USDC then returns to the first position as collateral. That creates a loop between USD1 and USDC on Dolomite. “The rationale behind this structure has not been disclosed,” Chaos Labs wrote.
The loop changed rates and utilization across both stablecoins. USD1 utilization rose to 83.4% on the protocol. USDC utilization climbed to 90.19%. Borrow rates for both assets moved to about 5%.
TVL concentration and token unlock timing stay in focus
Supply rates also moved up during the recent borrowing surge. USD1 supply rates reached 10.64% with Merkl rewards included. USDC supply rates reached 9.07%. Chaos Labs said the Merkl campaign ends in three days.
The report also pointed to thin market depth for WLFI outside Dolomite. It said collateral posted there exceeds Binance tradable supply by four times. Only 20% of WLFI is unlocked, according to the post. The remaining 80% still awaits a governance decision in mid-April.
After public scrutiny, the team repaid about $10 million in USD1. Chaos Labs said the team may add more collateral if needed. Wallet 0x5be9 also holds extra WLFI and USD1 that could support changes. Even so, World Liberty Finance still accounts for 82.7% of supplied TVL and 85.3% of borrowing.
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