[ARC] Add LUSD to Ethereum V3 Market

Governance
1

title: [ARC] Add LUSD to Ethereum V3 Market

Author: @marczeller - Aave-Chan Initiative

Dated: 2023-01-31

# Simple Summary

This proposal presents Aave with the opportunity to onboard LUSD to the Ethereum v3 Liquidity Pool.

# Abstract

LUSD is a decentralized stablecoin minted by the Liquity protocol. For more details about LUSD please refers to [Aave V2 ARC by @TokenBrice ARC: Add support for LUSD (Liquity))

This ARC is a joint effort with @Llamaxyz to allow a selection of assets to be onboarded on V3 via the governance process. Both Llama & ACI will propose AIPs on onboard assets on V3…

# Motivation

Supporting stablecoin diversity is part of the Aave-Chan Initiative (ACI) delegate platform.

The ACI does not have any link nor is paid by Liquity or any entity to present this ARC.

The risk parameters provided within are the same as those provided by Gauntlet within the initial forum post discussing which assets to onboard to v3 Ethereum.

The Interest rate Strategy curve is the same than for LUSD in V2. for now the ACI is supportive to onboard LUSD as it was on V2, when the V3 will be more mature, the ACI is supportive to work on AIP to allow usage of LUSD as a collateral.

By presenting each asset to be onboarded to v3 Ethereum individually, the community can focus on a specific asset, with individual Snapshots determining how to proceed. Finally, approved assets listings can be grouped for the on-chain AIP vote.

# Specification

Ticker: LUSD

Contract Address: https://etherscan.io/address/0x5f98805a4e8be255a32880fdec7f6728c6568ba0#code

Risk Parameter Value
Isolation Mode NO
Enable Borrow YES
Enable Collateral NO
Loan To Value N/A
Liquidation Threshold N/A
Liquidation Bonus N/A
Reserve Factor 10%
Liquidation Protocol Fee N/A
Borrow Cap 1,210k
Supply Cap 3,000k
Debt Ceiling N/A
Base 0%
Slope1 4%
Uoptimal 80%
Slope2 87%

# Copyright

Copyright and related rights waived via CC0.

11 Likes
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Hello, and thank you @MarcZeller, for handling this proposal to add LUSD to Aave v3 mainnet.

I just wanted to express my support and let the Aave community know I’m available if there is any question regarding Liquity’s model or LUSD. Considering the immutability of LUSD’s contracts and the limited risk scope paused by this proposal (LTV=0%), I expect it to be consensual.

Might I ask about the decision logic regarding the supply and borrow caps, though? While they seem reasonable, they might have to be revised upward quite quickly after the implementation. It’s not a big concern, though, as it can be addressed in the follow-up proposals (such as a non-0 LTV for LUSD).

The current main venue to borrow LUSD on mainnet, Euler Finance, has $4.28M LUSD supplied for $3.21M borrowed.

6 Likes
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Crypto Plaza fully support the onboarding of LUSD. It is one of the stablecoins that best represents the main values ​​of the crypto ecosystem. LUSD has shown its resilience during 2022 and it is precisely in these situations where such purist implementations of decentralization show their value proposition. It is a stable currency that strengthens the ecosystem and therefore it is positive that it can take on a more important role.

If generalized, it would mean a strong demand for ETH and therefore a higher level of security for Ethereum.

Congrats the team for the project.

1 Like
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Chaos Labs supports the proposal to list LUSD with the suggested parameters.

The initial parameter configuration is risk-averse as the asset is not initially enabled as collateral, with conservative supply and borrow caps when considering the asset’s on-chain liquidity.

Screen Shot 2023-02-08 at 13.28.22
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We support this approach as it allows a more controlled launch for the asset, with a cap high enough to attract migrated positions from V2 and new ones.

Screen Shot 2023-02-08 at 13.30.31
Screen Shot 2023-02-08 at 13.30.311568×584 45.6 KB

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considering @ChaosLabs reply, The ACI is escalading this proposal to Snapshot stage to allow governance to express their opinion on this onboarding.

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We are supportive of adding LUSD to ETH V3 under the suggested risk parameters.

Thanks for the post!

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These parameters follow Gauntlet’s original recommendation. Given that market conditions have not changed meaningfully since the original recs, we have no recommended changes to these parameters at this time.

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snapshot vote has been published,

we would like to thanks the community for their feedback and particularly risk teams @ChaosLabs & @Pauljlei for their review.

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Snapshot succeeds, and an AIP vote will be published in the following days after review.