Continuing the onboarding process that was begun here:
I would like to propose adding UST as a borrowable asset only pending a more thorough investigation of risks to potentially allow it as collateral. Adding UST as a borrowable asset only reduces the risk to Aave to near zero, and there is likely a sizeable market of folks that want to take leverage with UST.
Below is the risk analysis for the Wrapped UST token on Ethereum. I’ve opted to look at this as the underlying UST is unavailable to Aave.
Yeou Jie from DeFiance here. We are supportive of adding UST to both V2 and V3. UST’s growth has been astounding these couple of months, and is the most successful algo stable coin with a market cap of more than $10B. Aave’s liquidity and borrowing demand will surely benefit by supporting UST. I believe that the regulatory heat for asset backed stable coins will continue in 2022 and onboarding UST makes sense now.
Supporting UST initially with 0% LTV collateral should get more support from the wider community. Other risks such as peg mechanism, Do has mentioned that he plans to partially collateralise UST by creating a multi billion reserve of decentralised assets.
We are huge supporters of both Aave and Terra ecosystem, and believe this is a win win situation for both parties.
Adding UST as a borrowable asset seems like a no-brainer to me.
The support of more decentralized stables is a need shared across the larger DeFi ecosystem. By adding UST support for borrowing on Aave, the protocol can cement itself as a luminary and full-suite of assets.
I would note that the market cap of UST has 10x since the original time of posting:
In addition, there are robust (and frequent) liquidity mining proposals in the Terra ecosystem aimed at expanding UST across networks and chains. UST can now be found on Solana, BSC, Polygon, Ethereum, and soon Avalanche, driving the demand for borrowing.
Would this New Asset listing be supported in Aave V3? Or only V2?