[ARFC] Aave V3 Deployment on Celo

Title: [ARFC] Aave V3 Deployment on Celo

Authors: @Michigan_Blockchain - Michigan Blockchain, @Isha - Isha Varshney (Celo Foundation)

Date: 2023-08-21


This ARFC proposes the deployment of Aave V3 on Celo to expand Aave real-world lending and green asset collateral to users around the world, with the provision of rewards to bootstrap liquidity as outlined in the motivation section.


Upon approval by the Aave community, Aave V3 will be deployed on Celo with a selection of suitable assets for collateral, including CELO, WETH, USDC and cUSD. This deployment aims to enhance the growth and collaboration between the Aave and Celo communities, providing new opportunities for both ecosystems. For more details on Celo’s real-world usage and key features, please refer to the temp check.


Deploying Aave V3 on Celo presents potential benefits for both Aave and Celo ecosystems. The Celo ecosystem offers a unique value proposition featuring real-world usage and ReFi. As Aave will be given a prominent role on Celo, this deployment offers Aave differentiated expansion and revenue opportunities.

  1. Expand AAVE’s utility and user base: Celo’s mobile-first community has grown significantly over the past few months led by key launches that have brought in returning real-world users in emerging markets.
  2. Real-world DeFi and ReFi use cases: Aave will be heavily utilized, particularly in emerging markets where Celo has a growing presence, with protocols like GoodDollar and Grassroots Economics.
  3. Bootstrap growth and liquidity: The Celo Foundation will allocate 0.5% of CELO circulating supply as an incentive for Aave users to support the adoption and bootstrap growth on Celo. This deployment will bring new users to the Aave platform and reach more users from the Celo community. The Celo Foundation can also support Aave DAO in setting up a verified node for the Celo network (subject to technical requirements being met and voting by the community) for which Celo can provide a grant.
  4. Mento protocol liquidity support: The Mento protocol proposed returning 120M CELO to the Celo Community Fund, which the Celo community has expressed interest in placing in Aave to boost on-chain liquidity for CELO (pending a governance process). More details here. Additionally, a $10M CELO / wETH pool is now live on Uniswap.
  5. Natural capital-backed assets: In the long-term, this Celo x AAVE deployment has the potential to expand into assets such as tokenized carbon credit and other ReFi assets (conditional upon rigorous liquidity and credit assessments by Chaos Labs and others).


The ARFC suggests deploying Aave V3 on Celo with the following assets for collateral: WETH, USDC, CELO and cUSD. The table below combines both risk managers’ suggested risk parameters for each asset. The bolded values are Gauntlet’s more liberal recommendations. Over time, we expect we can continue to increase caps as the Celo blockchain grows through the development of more real-world use cases and the transition to an L2 on Ethereum.

Risk Parameters WETH USDC CELO cUSD
Isolation Mode NO NO NO YES
Enable Borrow YES YES YES YES
Enable Collateral YES YES NO YES
Emode Category N/A N/A N/A N/A
Loan To Value 80% 75% N/A 70%
Liquidation Threshold 82.5% 80% N/A 75%
Liquidation Bonus 5% 5% N/A 5%
Reserve Factor 15% 10% 15% 10%
Liquidation Protocol Fee 10% 10% 10% 10%
Borrow Cap 300 2,000,000 1,000,000 3,400,000
Supply Cap 300 2,000,000 1,000,000 4,300,000
Debt Ceiling N/A N/A N/A TBD
uOptimal 80% 80% 45% 75%
Base 1% 0% 0% 0%
Slope1 3.8% 4% 7% 5%
Slope2 80% 60% 300% 75%
Stable Borrowing Disabled Disabled Disabled Disabled
Stable Slope1 13.00% 13.00% 13.00% 13.00%
Stable Slope2 300.00% 300.00% 300.00% 300.00%
Base Stable Rate Offset 3.00% 3.00% 3.00% 3.00%
Stable Rate Excess Offset 5.00% 5.00% 5.00% 5.00%
Optimal Stable To Total Debt Ratio 20.00% 20.00% 20.00% 20.00%
Flashloanable YES YES YES YES
Siloed Borrowing NO NO NO NO
Borrowed in Isolation NO YES NO NO

Deployment Checklist:

  • Feedback from both risk service providers :heavy_check_mark:
  • BGD Labs Infrastructure/technical evaluation Report :x:
  • Oracle recommendation :heavy_check_mark: (Chainlink)
  • The graph support :heavy_check_mark:
  • Cross-chain messaging infrastructure for governance :heavy_check_mark:


Michigan Blockchain is not compensated in any form by Celo or creating this ARFC proposal. This ARFC has been prepared solely to facilitate community discussion.
At the time of writing, the author owns ~70$ worth of assets on the Celo chain.

Next Steps

  1. Integrate BGD Labs Infrastructure/technical evaluation report once available.
  2. Refine the ARFC based on community feedback and risk service provider recommendations.
  3. If consensus is reached and the proposal is refined, submit the ARFC for a snapshot vote for final approval.
  4. If consensus is reached, submit a deployment AIP to activate Aave V3 on Celo.


Copyright and related rights waived via CC0.


As mentioned in the Temperature Check, I’d like to stress that as a long-term Aave user and DeFi builder on Celo, I 100% support this proposal. It has been anticipated for a while. I’d also like to point out that there are some very exciting large-scale use cases brewing in the Celo ecosystem for which Aave would be a perfect fit! Let’s make sure the Celo builders get access to the best lending market out there, to run their apps on.

The incorporated recommendations from Gauntlet provide a solid framework for the initial deployment parameters.

I’m eagerly awaiting the BGD evaluation report and hope for a swift deployment!


Chaos Labs provided initial recommendations, which can be found in the original [Temp-Check] post.
We will provide updated recommendations at a later stage, following the technical evaluation and closer to launch, to reflect up-to-date liquidity and market data.


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