ARC: Add UST as a borrowable asset

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.

Risk Analysis

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.

Smart Contract Risk

Contract: Terra: UST Token | 0xa47c8bf37f92abed4a126bda807a7b7498661acd
Maturity: 404 days
Transctions: 166k

Counterparty Risk

Holders: 25,596
Permission: Multi-sig Minting, permissionless

Market Risk

Market Cap: 10.4B

I’ll leave the rest out as this is not relevant for a borrow-only asset as liquidations are turned off.

Parameter Suggestion

Currency: yes
Collateral: no
eMode Group: stablecoins
Interest Rate Curve: Uopt = 90%, base = 0%, slope1 = 4%, slope2 = 60%

Should UST be added to Aave as a borrowable asset with the above parameters?
  • Yes
  • No
  • Abstain

0 voters

If sentiment is positive, I will add a snapshot poll followed by submitting the code changes in the AIP. Please let me know if I’ve missed anything in this proposal.

5 Likes

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.

2 Likes

Hi @FrogNation Good to see your proposal. It is essential to keep growing the protocol

It would be good to see the risk assessment as described here New Asset Listing - Governance

And my personal favorite - the risk methodology Methodology - Risk

As you have quoted from them I see you are aware we have already had quite a long discussion of UST fairly recently. Would be good to see the updates assessment to help with the voting

2 Likes

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?

I will also share this interactive UST tool, created by our Data Science team:

Screen Shot 2022-01-03 at 1.25.46 PM

https://science.flipsidecrypto.com/ust

It shows how UST is used across the Terra ecosystem and could mirror the widespread potential of UST on Aave and other DeFi primitives.

1 Like

Added the Risk Analysis in the original post. Sentiment seems positive so will proceed to a snapshot poll shortly.

2 Likes

Snapshot vote is up: Snapshot

Hey @FrogNation,

Thank you for submitting this ARC and vote. As a part of the New Asset Listing requirements, below are the Chainlink Oracle addresses needed for UST.

UST / USD - 0x8b6d9085f310396C6E4f0012783E9f850eaa8a82
UST / ETH - 0xa20623070413d42a5C01Db2c8111640DD7A5A03a

Good luck with the vote!

2 Likes

Vote has passed and a PR has been submitted. What are the next steps?

next step is on-chain binding AIP

feel free to ping me on TG, I’ll support for building the AIP payload. I’m @lemiscate there.