[ARC] Aave V3 Ethereum Deployment: Assets and Configurations

Simple Summary

Discuss which assets should be listed on Aave V3 Ethereum initially and the configuration of those assets.

Abstract

Following the community’s decision to deploy a new Aave V3 Ethereum, it is now time for the community to make important choices around how to design V3 ETH’s initial market structure.

This ARC kickstarts community discussion around the tactical implementation of a new Aave V3 deployment on Ethereum. Decisions regarding V3 ETH deployment have both strategic and risk implications. Gauntlet can provide analysis and context around market risk, and the community should also weigh the strategic considerations when evaluating different tradeoffs.

  • As a first step, we provide the community with recommendations and options for which assets to list initially on Aave V3 ETH, specifically for the “standard” market.
  • After the community decides which assets should be initially listed on the “standard” market, the next topic of discussion is the configuration of specific modes (e.g., e-mode categories and which assets should be included in those categories, isolation mode, and siloed borrowing).
  • Following that, Gauntlet can provide parameter recommendations for these assets and modes. Although Gauntlet’s risk simulation platform will drive parameter recommendations for V3 ETH following the V3 ETH launch, the initial V3 ETH launch requires more community input because there are meaningful strategic implications (e.g., incentivizing users to migrate their V2 positions onto V3), making it important for the community to discuss the tradeoffs.

Motivation

BGD has proposed rolling out a fresh deployment of Aave V3 ETH, instead of upgrading existing V2 contracts. The community has approved this proposal.

Now, there are important choices presented to the community. Given the sheer complexity and scope of the decisions that the community is faced with, we break down the decisions into several questions to help organize community discussion to find consensus:

  1. Which assets should be initially included in the standard V3 Ethereum market?
  2. Which V3 modes should be “active,” and how should those modes be structured (which categories/assets should they include)?
  3. What should the parameters be for initial V3 ETH deployment? In particular, what should the parameters be for the standard market? And if the community decides to enable specific modes upon initial V3 launch, how should those modes be configured?

It is important for the community to first decide on Question #1. After the community decides on Question #1, we will provide more color and recommendations on Question #2 and Question #3.

At a high level, as Aave V3 ETH scales to billions of dollars of TVL, protecting user funds is of utmost importance. This importance is greater magnified by the potential facilitator role V3 will play for GHO.

Specification

Gauntlet developed a scoring methodology to recommend assets to include initially in Aave V3 Ethereum’s standard market based on features related to market size, risk, and V2 usage, incorporating both Aave’s protocol data and external market data. We recommend that the assets in Aave V3 ETH’s standard market should primarily be a subset of the assets on Aave V2 ETH, as the community has already decided to include those assets in the ETH protocol. Thus, we apply this scoring methodology to the list of assets on Aave V2 ETH.

We purposely did not run simulations for this exercise because 1) while V3 has overlapping qualities with V2, initial usage on V3 could be markedly different, making simulations have outsized statistical variance, and 2) simulation on new markets requires numerous assumptions, many of which are likely to be inaccurate.

The following table ranks the assets for initial inclusion in Aave V3 ETH’s standard market based on our overall score; we separated “Non-Stable Coin” and “Stablecoin” assets in order to give the market a diverse set of assets at the onset.

Non-Stable Coins

Stablecoins

Gauntlet recommends two initial listing options, both of which combine non-stable and stable assets, for Aave’s V3 ETH’s launch. The community may have strategic considerations around how broad the initial V3 launch for the standard market should be, so we provide the below 2 options to kickstart community discussion. To be clear, these recommendations are only for the selection of assets. If an asset is disabled as a collateral asset or disabled as a borrowable asset on Aave V2, we recommend initially maintaining those deactivations on the V3 ETH standard market. We understand that Aave V3 has new features such as Efficiency mode, Isolation mode, and Siloed Borrowing. We will address the community about utilizing those features in future discussions when we provide a more granular analysis of each asset candidate. We recognize that there may be more complex questions, such as “although USDT is not enabled as collateral on V3 ETH’s regular market, should we enable it as collateral in isolation mode?” These questions are important; however, to help organize community consensus, we focus on Question #1 in this forum post.

Option 1 - Limited Launch

This conservative option selects the top 25th percentile of assets scored between the Non-stable and Stable assets.

Non-Stable Assets: WETH STETH WBTC MANA LINK AAVE*

Stable Assets: USDC USDT DAI

*AAVE is not in the top 25th percentile, but we still recommend listing the asset on the V3 platform for strategic and protocol value purposes.

To clarify, upon the initial V3 ETH launch, STETH and AAVE borrowing would be disabled, and USDT would not be enabled as collateral (consistent with V2 deactivation settings).

Option 2 - Broader Launch

This less conservative option selects the top 50th percentile of assets scored between the Non-Stable and Stable assets.

Non-Stable Assets: WETH STETH WBTC MANA LINK CRV AAVE UNI MKR SNX 1INCH

Stable Assets: USDC USDT DAI TUSD BUSD SUSD

To clarify, upon the initial V3 ETH launch, STETH and AAVE borrowing would be disabled. USDT, BUSD, and SUSD would not be enabled as collateral (to be consistent with V2 deactivation settings).


The community may decide to include more assets upon the initial Aave V3 ETH launch due to those assets’ importance to the Aave DAO’s business plans and partnerships. Those assets’ strategic/partnership importance is more difficult to quantify, which is why those assets may be excluded from Gauntlet’s recommendation, which relies on quantitative factors. We would encourage the community to discuss if there are additional assets that should be included in the initial V3 ETH launch. Our methodology is meant to be a starting point to kickstart community discussion.


Methodology

Our methodology scores assets to be recommended to V3 ETH using 6 features for non-stable assets and 4 features for stable assets. The features capture an asset’s market opportunity and general market risk to Aave. Below we define the features within our scoring methodology:

  • Volatility: This 30-day price volatility measurement is a proxy for liquidation, slippage, and insolvency risk on the platform. Using the Garman Klass volatility estimator, which utilizes both daily High and Low prices as well as daily Open and Close prices, the annualized volatility for each asset can be calculated as follows:

  • Supply Balance: This is the total asset supply in USD on Aave V2 ETH. A higher supply balance implies a greater potential market opportunity and usage for the platform.
  • Utilization: Asset utilization captures asset usage and market opportunity, as defined below.

  • Borrow Usage: This reflects how aggressively suppliers of collateral borrow against their supply. Higher borrow usage implies more capital efficiency for the platform.

  • Daily Volume/Supply Balance Ratio: This is a proxy of an asset’s liquidity risk in relation to the supply balance on Aave’s platform. In a worst-case scenario where a large supply of an asset was liquidated and thus sold at a discount, downward pressure on the asset could cause cascading liquidations across platforms. A high daily volume relative to supply implies the market can absorb such an influx of the supplied tokens without causing significant slippage or systemic liquidity issues.

  • Daily Volume/Borrow Balance Ratio: This is a proxy of an asset’s liquidity risk in relation to the borrow balance on Aave’s platform. Liquidators must transact in the borrowed asset, which could cause meaningful slippage in extreme liquidation events. A high daily volume relative to borrow implies there is less risk of slippage with respect to borrowed assets.

  • Market Cap: This reflects external opportunity size, level of liquidity, and adoption risk for an asset. The market cap is a proxy for how large reserves can grow on Aave.

Next Steps

  • As a first step, the community should decide which assets to include for Aave V3 ETH’s standard market (Question #1), per the above analysis.
  • Following that, discuss options and tradeoffs for Question #2.
  • Following that, discuss options and tradeoffs for Question #3.
  • We will publish Snapshot votes as needed to help the community reach a consensus. We will keep in mind the tradeoffs between allowing time for community discussion versus the speed of V3 ETH deployment.

Quick Links

BGD Proposal for a fresh V3 Ethereum deployment

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.

4 Likes

As both #option 1 and #option 2 presented here include stETH I’d like to draw attention to the original blog post. BGD. Aave v3 Ethereum. New deployment vs Aave v2 Upgrade

  • It gives the possibility for the community to reassess the risk configuration of the assets currently listed on v2. With an upgrade v2→v3, everything will remain the same as currently, that is not possible. It is important to highlight that this also allows for the listing of for example fewer Aave-custom implementations for some assets, like wstETH, instead of the current stETH version listed on v2.

stETH has some issues Account's `stETH` balance getting lower on 1 or 2 wei due to rounding down integer math · Issue #442 · lidofinance/lido-dao · GitHub which cause contracts that rely on exact precision (e.g. liquiditySwap / repayWithCollateral features) to fail. From a technical perspective, I would highly recommend to consider listing wstETH instead as it’s not affected by this balance inaccuracy. Also it would allow listing wstETH with the default a/s/v implementations.

7 Likes

I would push for a more inclusive initial listing, especially as a method of convincing as many folks as possible to migrate from V2 → V3.

I would support option 2, however include more assets, specifically:

Stables: FRAX, GUSD, LUSD
Non-Stables: BAL, CVX, YFI

Rational:

  • More Stables: One of the primary uses of Aave is receiving liquidity against volatile collateral in the form of stables. Therefore, we should lean towards the inclusion of more stables.
    • FRAX is one of the largest stablecoins, with over 1.3B in circulation. Additionally, FRAX is actively incentivizing aFRAX with an FXS gauge.
    • GUSD is a stablecoin directly backed and redeemable by Gemini, an off-ramp for many crypto users. With Gemini’s new posture towards promoting its use and utility in DeFi (see their discussions with Maker), I see no reason not to include it in the initial V3 deployment. At over 300MM in circulation, it is more widely issued than the included SUSD.
    • LUSD is an immutable, censorship-resistant decentralized stablecoin. Given recent regulatory action and the subsequent reaction by the crypto community, there will be a clear demand for the borrowing of such products. Given the recency of its listing and the high amount in circulation (over 150MM, larger than the included SUSD), it is a strong candidate for initial V3 inclusion.
  • Non-Stables: There are several tokens not included in option 2 that represent strategic importance to the DAO, and should be included in an initial V3 deployment.
    • BAL: Balancer is one of Aave DAO’s closest partners, between the use of aBPT for the safety module, the use of bb-a-usd as the revenue token of veBAL, and multiple token swaps and acquisitions. Given the depth of the relationship between the 2 entities and the DAO’s desire to continue acquiring BAL, not including BAL in the initial deployment would be a misstep.
    • CVX: With GHO on the horizon, and CRV’s current status as the dominant stablecoin DEX, acquisition of CRV and CVX should be a priority for the DAO. Hence including it in a V3 should be a priority.
    • YFI: Yearn is one of the largest users of Aave, across multiple chains. Beyond their AAVE and sAAVE vaults, their various vaults across Ethereum, Arbitrum, and Optimism leverage Aave as a key DeFi building block. As a key partner, YFI should be included in the initial deployment list.

For ease of conversation, a chart of existing V2 assets + Gauntlet’s 2 options + my proposal above is included.

Asset Gauntlet 1 Gauntlet 2 oneski22 Proposal
USDC YES YES YES
ETH YES YES YES
stETH YES YES YES
WBTC YES YES YES
USDT YES YES YES
DAI YES YES YES
LINK YES YES YES
CRV - YES YES
AAVE YES YES YES
MKR - YES YES
TUSD - YES YES
FRAX - - YES
BUSD - YES YES
YFI - - YES
UNI - YES YES
ZRX - - -
MANA YES YES YES
xSUSHI - - -
1INCH - YES YES
DPI - - -
GUSD - - YES
SNX - YES YES
CVX - - YES
BAT - - -
REN - - -
sUSD - YES YES
ENJ - - -
BAL - - YES
AMPL - - -
RAI - - -
USDP - - -
UST - - -
LUSD - - YES
FEI - - -
renFIL - - -
KNC - - -

Note: Assets sorted by Aave V2 Total Supply as of Block 15726280. All numerical stats sourced from DeFi Llama as of Block 15726280.

4 Likes

In general agree with the need to reassess the collateralization factor of many assets and get rid of the less liquid/more problematic/deprecated. My opinion is that we should leverage more isolation mode and let everyone that was able to use V2 to also use V3, with some limitations introduced by isolated assets. One important point i want to highlight is that in my opinion all the less liquid assets currently used on V2 should be demoted as non collateral to avoid risk. If we give them the possibility to still use these asset in V3 (albeit as isolated), we don’t introduce any discomfort for users, and we reduce risk on V2 as well. Here is my proposal, following @oneski22 approach

Asset Gauntlet 1 Gauntlet 2 oneski22 Proposal Emilio Proposal
USDC YES YES YES YES
ETH YES YES YES YES
stETH YES YES YES YES (wstETH)
WBTC YES YES YES YES
USDT YES YES YES YES
DAI YES YES YES YES
LINK YES YES YES YES
CRV - YES YES YES
AAVE YES YES YES YES
MKR - YES YES YES
TUSD - YES YES YES (Isolated)
FRAX - - YES YES (isolated or no collateral)
BUSD - YES YES YES (no collateral)
YFI - - YES YES (isolated?)
UNI - YES YES YES (isolated?)
ZRX - - - YES (isolated)
MANA YES YES YES YES (isolated)
xSUSHI - - - -
1INCH - YES YES YES (isolated)
DPI - - -
GUSD - - YES -
SNX - YES YES YES(isolated)
CVX - - YES YES(isolated)
BAT - - - YES(isolated)
REN - - - YES(isolated)
sUSD - YES YES YES(isolated or no collateral)
ENJ - - - -
BAL - - YES YES(isolated)
AMPL - - - -
RAI - - - -
USDP - - - -
UST - - - -
LUSD - - YES YES (isolated or no collateral)
FEI - - - -
renFIL - - - -
KNC - - - (there is a proposal to list the new KNC token, so we should evaluate how that goes)
4 Likes

Thank you @sakulstra @oneski22 @Emilio and all for your feedback. We present Gauntlet 3 below in an attempt to incorporate the community feedback.

We would like to call out the price manipulation analysis that Gauntlet has provided here. 6 assets are being discussed: BAL BAT DPI MANA REN ZRX.

Should the community decide to disable those assets as collateral, then we recommend that those assets should also not be enabled as collateral on V3 ETH.

In addition, we hear the community feedback around listing wstETH instead of stETH. There may be price manipulation potential with the wstETH mechanism, so Gauntlet is currently analyzing the risk.

Asset Gauntlet 1 Gauntlet 2 oneski22 Proposal Emilio Proposal Gauntlet 3
USDC YES YES YES YES YES
ETH YES YES YES YES YES
stETH YES YES YES YES (wstETH) YES (wstETH, pending analysis)
WBTC YES YES YES YES YES
USDT YES YES YES YES YES
DAI YES YES YES YES YES
LINK YES YES YES YES YES
CRV - YES YES YES YES
AAVE YES YES YES YES YES
MKR - YES YES YES YES
TUSD - YES YES YES (Isolated) YES (Isolated)
FRAX - - YES YES (isolated or no collateral) YES (no collateral)
BUSD - YES YES YES (no collateral) YES (no collateral)
YFI - - YES YES (isolated?) YES (isolated)
UNI - YES YES YES (isolated?) YES (isolated)
ZRX - - - YES (isolated) YES (isolated), but TBD
MANA YES YES YES YES (isolated) YES (isolated), but TBD
xSUSHI - - - - -
1INCH - YES YES YES (isolated) YES (isolated)
DPI - - - - -
GUSD - - YES - -
SNX - YES YES YES(isolated) YES(isolated)
CVX - - YES YES(isolated) YES(isolated)
BAT - - - YES(isolated) YES(isolated), but TBD
REN - - - YES(isolated) YES(isolated), but TBD
sUSD - YES YES YES(isolated or no collateral) YES(no collateral)
ENJ - - - - -
BAL - - YES YES(isolated) YES(isolated), but TBD
AMPL - - - - -
RAI - - - - -
USDP - - - - -
UST - - - - -
LUSD - - YES YES (no collateral) YES (no collateral)
FEI - - - - -
renFIL - - - - -
KNC - - - (there is a proposal to list the new KNC token, so we should evaluate how that goes) -
4 Likes

Great Breakdown!

My general opinion is also that we should include as many options as possible for users and use the e-mode as much as possible for the riskier assets! So I would be in favour of Gauntlet 3!

Thanks guys!

1 Like

Thanks for the updated suggestions and analysis performed.

In general, I am in support of Gauntlet 3.

However, where an asset is listed in 3 but not in 1 (and can be used as collateral), I believe that the supply caps of these assets should be assessed and suggested as part of this proposal. (I would expect there to be supply caps on these assets).

Regarding wstETH vs stETH:

Other lending protocol (won’t name) have both stETH and wstETH. Can this not be an option as well?
It would be interesting to get @Emilio’s thoughts here.

Hi @Pauljlei,

Please see below from Llama:

Asset Gauntlet 1 Gauntlet 2 oneski22 Proposal Emilio Proposal Gauntlet 3 Llama Proposal
USDC YES YES YES YES YES YES
ETH YES YES YES YES YES YES
stETH YES YES YES YES (wstETH) YES (wstETH, pending analysis) YES (wstETH)
WBTC YES YES YES YES YES YES
USDT YES YES YES YES YES YES
DAI YES YES YES YES YES YES
LINK YES YES YES YES YES YES
CRV - YES YES YES YES YES
AAVE YES YES YES YES YES YES
MKR - YES YES YES YES YES
TUSD - YES YES YES (Isolated) YES (Isolated) YES (Isolated)
FRAX - - YES YES (isolated or no collateral) YES (no collateral) YES (no collateral)
BUSD - YES YES YES (no collateral) YES (no collateral) YES (no collateral)
YFI - - YES YES (isolated?) YES (isolated) YES
UNI - YES YES YES (isolated?) YES (isolated) YES
ZRX - - - YES (isolated) YES (isolated), but TBD YES (isolated)
MANA YES YES YES YES (isolated) YES (isolated), but TBD YES (isolated)
xSUSHI - - - - - -
1INCH - YES YES YES (isolated) YES (isolated) YES
DPI - - - - - YES
GUSD - - YES - - -
SNX - YES YES YES(isolated) YES(isolated) YES
CVX - - YES YES(isolated) YES(isolated) YES
BAT - - - YES(isolated) YES(isolated), but TBD YES(isolated)
REN - - - YES(isolated) YES(isolated), but TBD YES(isolated)
sUSD - YES YES YES(isolated or no collateral) YES(no collateral) YES
ENJ - - - - - -
BAL - - YES YES(isolated) YES(isolated), but TBD YES
AMPL - - - - - -
RAI - - - - - -
USDP - - - - - -
UST - - - - - -
LUSD - - YES YES (no collateral) YES (no collateral) YES
FEI - - - - - -
renFIL - - - - - -
KNC - - - (there is a proposal to list the new KNC token, so we should evaluate how that goes) - -
ENS - - - - - YES

Llama is supportive of retaining DPI as it is the market leading index product on the market. It has a reliable composite Chainlink oracle and liquidators are able to interact with Index Coop’s Exchange Issuance contract to mint DPI which eliminates the need to rely of DPI liquidity. Llama has worked with Fireblocks to attain approval for listing DPI on the Aave ARC Liquidity Pool and is currently working towards compiling a proposal for the community to vote on.

If a new proposal is needed to list wstETH, then please flag that here and Llama can work with Lido to create this proposal. This way stETH can remain on v2 and wstETH goes through the normal asset listing governance process.

BAL, CRV and CVX are all significant assets for Llama’s future plans and consequently, we seek to maximise the utility of these assets on the v3 deployment.

Is it Gauntlet’s plans to present SupplyCap and BorrowCap for various assets in a separate post ?

Llama would like to present the eMode categories for the community discussion as a separate post. The eModes for BAL, CRV, CVX and ETH are of particular interest. We also seek to incorporate feedback from various partners around utilising the wstETH/ETH recursive loop to generate yield on other assets, especially those more correlated with ETH price movements.

Separate to the assets listing aspects to the new v3 deployment, we should consider the Interest Rate curve and the possibility of re-baselining the revenue generation model. The ETH, BAL, CRV and CVX Reserve Interest Rate can be revised to improve profitability and user experience. The ETH Reserve Interest Rate should be revised to improve profitability as the v2 Interest Rate curve changes are overly optimised for users. In time, Llama will be presenting a proposal to tweak the v2 ETH Reserve Interest Rates.

3 Likes

hello boys and girls

just like to point out that the list you’re operating with is missing ENS token for some reason - even though less utilized tokens (cough, renFIL, cough) are on it

1 Like

weren’t those v2-specific features? are those present in v3 (or others that rely on exact precision)?

Not v2 specific, the same issue is present on v3 as well.

I would advocate for omitting DPI due to a low market cap (~$32mm.)

We are supportive of the third version of this proposed list, a combined iteration of Gauntlets’, Emilio, and Oneski22. @sakulstra thanks for the technical clarity here - wstETH seems best.

While DPI had demand and fit well into the meta-governance play, it feels best to not include it in V3 due to the recent mango hack and threats circulating social media.

If this perspective changes, we welcome a proposal to re-list and enable borrowing.

The list IMO which should be regarded this way is:

DeFiPulse Index ($32m)
Ren ($111m)
xSUSHI ($100m)

This is being discussed in parallel at: [ARC] Price Manipulation Implications on Aave: October 2022

Hey,
Gregory from Lido here :desert_island:
Thank you for taking a close look at wstETH, we are also thinking of price manipulation potential around its mechanism. The Lido team is in touch with Gauntlet, we will be back with more details if we find anything unexpected on our side.

1 Like

The DeFi Pulse Index, operated by Index Coop, has been available as collateral on Aave v2 markets for over a year. Snapshot vote for reference.

When referencing the recent Mango Markets incident, I assume this means oracle manipulation. TVL should not be the sole parameter for determining the risk of price manipulation. For DPI, in particular, the permissionless mint/redeem capabilities (as mentioned by Llama) allow for arbitrage opportunities when any of the underlying assets see significant price deviation.

Index Coop previously dealt with an attack similar to the recent Mango incident. At the start of the year, an attacker attempted to manipulate an oracle for the BED Index through Rari markets. This attack was unsuccessful because all Index Coop products can be freely minted making it easy for arbers to act quickly. This thread gives a detailed account of this failed attack. Moreover, our Flashmint functionality makes this arbitrage opportunity even easier, using Aave to instantly create a flashloan into the position. We’ve seen significant volume in our Flashminting contracts up until now and expect any significant deviation to see an immediate arb.

As Aave and the defi ecosystem matures, Index Coop believes structured products with inherent risk management are critical. We’ve seen larger DPI holders use DPI as collateral on Aave and expect this to continue as we strive to get DPI into the hands of more traditional investors. We hope to see DPI listed amongst this first batch of assets and bring increased buy pressure for the largest tokens in DeFi including AAVE. While DPI is one of the lower market cap assets, it is far less risky for Aave than most assets being proposed. As one of the largest voters in AAVE governance we looks forward to voting on these new assets in V3 and are happy to answer any questions.

3 Likes

Thank you, everyone, for your thoughts. We propose Gauntlet 4 below. To keep the discussion moving forward, we are targeting a Snapshot vote next week for Gauntlet 4 with the options YAE, NAY, and ABSTAIN.

Following this Snapshot vote, we look forward to providing parameter recommendations for the standard V3 market.

We’d note that we include USDT in isolation mode, similar to V3 Avalanche and V3 Polygon.

Asset Gauntlet 1 Gauntlet 2 oneski22 Proposal Emilio Proposal Gauntlet 3 Llama Proposal Gauntlet 4
USDC YES YES YES YES YES YES YES
ETH YES YES YES YES YES YES YES
stETH YES YES YES YES (wstETH) YES (wstETH, pending analysis) YES (wstETH) YES (wstETH)
WBTC YES YES YES YES YES YES YES
USDT YES YES YES YES YES YES YES (Isolated)
DAI YES YES YES YES YES YES YES
LINK YES YES YES YES YES YES YES
CRV - YES YES YES YES YES YES
AAVE YES YES YES YES YES YES YES
MKR - YES YES YES YES YES YES
TUSD - YES YES YES (Isolated) YES (Isolated) YES (Isolated) YES (Isolated)
FRAX - - YES YES (isolated or no collateral) YES (no collateral) YES (no collateral) YES (no collateral)
BUSD - YES YES YES (no collateral) YES (no collateral) YES (no collateral) YES (no collateral)
YFI - - YES YES (isolated?) YES (isolated) YES YES (isolated)
UNI - YES YES YES (isolated?) YES (isolated) YES YES (isolated)
ZRX - - - YES (isolated) YES (isolated), but TBD YES (isolated) YES (isolated)
MANA YES YES YES YES (isolated) YES (isolated), but TBD YES (isolated) YES (isolated)
xSUSHI - - - - - - -
1INCH - YES YES YES (isolated) YES (isolated) YES YES (isolated)
DPI - - - - - YES YES (isolated)
GUSD - - YES - - - -
SNX - YES YES YES(isolated) YES(isolated) YES YES(isolated)
CVX - - YES YES(isolated) YES(isolated) YES YES(isolated)
BAT - - - YES(isolated) YES(isolated), but TBD YES(isolated) YES(isolated)
REN - - - YES(isolated) YES(isolated), but TBD YES(isolated) -
sUSD - YES YES YES(isolated or no collateral) YES(no collateral) YES YES(no collateral)
ENJ - - - - - - -
BAL - - YES YES(isolated) YES(isolated), but TBD YES YES(isolated)
AMPL - - - - - - -
RAI - - - - - - -
USDP - - - - - - -
UST - - - - - - -
LUSD - - YES YES (no collateral) YES (no collateral) YES YES (no collateral)
FEI - - - - - - -
renFIL - - - - - - -
KNC - - - (there is a proposal to list the new KNC token, so we should evaluate how that goes) - - -
ENS - - - - - YES Yes (isolated)
2 Likes

Regarding some technical aspects affecting the listing of assets in the future Aave v3 Ethereum:

  • In order to have unified behavior across all Aave v3 instances, we recommend using USD as the reference currency of the Aave oracle, changing this way from the ETH reference on Aave v2 Ethereum.
    Given the presence on the Ethereum v2 pool (and plans for the upcoming v3) of stETH, we will be introducing an oracle adapter to be used by wstETH as a price feed, to avoid any problem with async updates from Chainlink price feeds.
  • We recommend using the BTC/USD feed for WBTC, as we consider it more representative than an alternative WBTC/USD, based exclusively on the secondary market value of WBTC.
  • For the listing of wstETH, it will be necessary to evaluate the availability of a conversion feed between stETH and wstETH, as the pricing should be through the chain ETH/USD → stETH/ETH → wstETH/stETH.
  • For if not taken into consideration, it is essential to highlight that DPI is a Chainlink calculated price feed, meaning that its value derives from the aggregated value of its underlying assets.

We will be synchronizing with Chainlink to verify that all the requirements in terms of feeds are met before any deployment of Aave v3 Ethereum by the community.

3 Likes

We have published the Snapshot vote below and encourage all in the community to participate.

https://snapshot.org/#/aave.eth/proposal/0x288caef0d79e5883884324b90daa3c5550135ea0c78738e7ca2363243340c2da

1 Like

Hi @Pauljlei - we have expressed this privately but feel concerned about the inclusion of DPI / ENS.

Both seem to be proposed as a result of external partnerships, which are now no longer relevant.

Happy to be more explicit if needed.

Looking at these assets, on V2 - only 43 addresses borrowed DPI at a total of $1,971,056.

ENS had 77 unique addresses for a total of $8,732,512.


xSUSHI, omitted from the list, was borrowed by 167 users for a total of $186,286,217

Or look at ENJ, 292 unique addresses for a total $24,448,819.

I understand there are important risk metrics involved as well, but at face value, some of the other assets would be a better fit - looking at demand and users.

This deliberate choice of long-tail assets feels a divergence of two different strategies. This is a critical time for the DAO to choose: either we list a bunch of assets, boosting a UX and freedom.

Or - we focus on the ones with verifiable, proven demand.

This analysis needs to include the recency of demand but it is important question to consider for developing a new market - which type of assets do we focus on?

We say this as ENS delegates too.

2 Likes

Chaos Labs would like to express our support of this proposal. As we commented before, Aave v3 offers improved risk mitigation mechanisms (such as Isolation Mode, Supply/Borrow Caps) and we believe it is of the community’s best interest for users to migrate from v2 to v3. We believe this initial list of assets is a significant first step that can help achieve this goal. In that spirit, we also recommend adding ENJ as an isolated asset, as it is currently the only asset available to be used as collateral on v2 that is not on the proposed list.

We look forward to the deployment of Ethereum V3 and partnering with other contributors to enhance the ongoing safety and growth of the protocol via parameter recommendations and new asset listings.

2 Likes

Why enabling stETH/wsthETH as collateral at deployment? I understand that’s the current situation with Aave V2, but I wonder if it was the right choice at that time.
Allowing borrowing any asset against stETH in Aave, it’s a significant risk to the protocol solvency which Aave cannot control.
Firstly, although there is a tentative timeline for withdrawals enabled on main-net, Aave cannot know how long it will take and what will be impact of it on stETH/ETH liquid markets.
Secondly, the Lido withdrawal contract is not even deployed yet. Before allowing stETH as non-isolated collateral, I think Aave should wait for multiple audits/formal verification on the final implementation and that the contract is deployed and immutable.

I propose stETH/wsETH to be enabled in isolated mode in Aave V3, pending Lido full withdrawal contract implementation and withdrawals enabled on main-net.