Title: [ARFC] Aave V3 Deployment on Scroll mainnet
Author: Aave-Chan Initiative
Date: 2024-01-09
Summary:
Proposal to deploy an Aave v3 MVP to Scroll mainnet with limited assets onboarding and conservative risk parameters in order to allow Aave to establish a strategic position in the Scroll ecosystem while limiting risk exposure.
Abstract:
This ARFC proposes the deployment of Aave V3 on Scroll mainnet. Scroll is an EVM-equivalent zk-rollup with the primary goal to provide scalability to Ethereum in the most robust and secure way. Scroll has been open source from day 1, has a strong in-house security team paired with rigorous audits, third party provers from their mainnet genesis block and are conducting a gradual decentralization of our sequencer network.
Motivation:
Aave will be given a prominent role in the early Scroll ecosystem and will be able to establish a strategic presence early on. Aave will be in good company as 150+ projects are launching on the network and Aave will be able to harness a vibrant new ecosystem that expands across the globe.
Proof of Liquidity and Deposit Commitments:
Recognizing the importance of stablecoins to the DeFi ecosystem generally and Aave ecosystem in particular, Aave’s expansion onto Scroll mainnet will be supported by immediate liquidity of 500,000 USD in $AAVE staked to the Aave Safety Module to provide additional security guarantees and limit risk exposure to the DAO.
Specification:
The proposal will detail the deployment of Aave V3 on Scroll mainnet with three collaterals (WETH, USDC, wstETH) and one borrowable asset (USDC). We consulted Gauntlet and Chaos Labs for preliminary risk parameters.
As part of its delegate platform, the ACI promotes L2 diversity. The Aave-Chan Initiative (ACI) is not associated with or compensated by Scroll for publishing this ARFC.
Next Steps:
Refine the ARFC based on community feedback and risk service provider recommendations.
If consensus is reached and the proposal is refined, submit the ARFC for a snapshot vote for final approval.
If consensus is reached, submit a deployment AIP to activate Aave V3 on the Scroll.
Scroll Risk Analysis and Initial Parameter Recommendations
Recommended Initial Parameters
Gauntlet and ChaosLabs recommend the following initial parameters for wETH, wstETH, and USDC on Aave V3 Scroll.
Risk Parameter
WETH
wstETH
USDC
Isolation Mode
NO
NO
NO
Enable Borrow
YES
YES
YES
Enable Collateral
YES
YES
YES
Emode Category
ETH
ETH
No
Loan To Value
75%
75%
77%
Liquidation Threshold
78%
78%
80%
Liquidation Bonus
6%
10%
5%
Reserve Factor
15%
15%
10%
Liquidation Protocol Fee
10%
10%
10%
Supply Cap
400
130
1,000,000
Borrow Cap
320
45
900,000
Debt Ceiling
N/A
N/A
N/A
uOptimal
80%
45%
90%
Base
0%
0%
0%
Slope1
3.3%
7.0%
5%
Slope2
80%
300%
60%
Supply caps
We recommend setting supply caps at 2x the available liquidity under the Liquidation Penalty price impact. Given the low liquidity on DEXes for wstETH, we suggest launching with conservative supply caps equal to ~10% of the total circulating supply.
eMode
We recommend the ETH eMode pools start with the same parameters as Ethereum mainnet, Optimism, and Gnosis: 93% LT, 90% LTV, and 1% LB.
Supporting Data
Since the official launch of Scroll on Mainnet, the total assets circulating has reached $45M with a TVL of $17M.
Gauntlet and ChaosLabs have refreshed our recommendations given the latest liquidity data for the following initial parameters for wETH, wstETH, and USDC on Aave V3 Scroll.
Risk Parameter
WETH
wstETH
USDC
Isolation Mode
NO
NO
NO
Enable Borrow
YES
YES
YES
Borrowable in Isolation
NO
NO
YES
Enable Collateral
YES
YES
YES
Emode Category
ETH
ETH
N/A
Loan To Value
75%
75%
77%
Liquidation Threshold
78%
78%
80%
Liquidation Bonus
6%
7%
5%
Reserve Factor
15%
15%
10%
Liquidation Protocol Fee
10%
10%
10%
Supply Cap
240
130
1,000,000
Borrow Cap
200
45
900,000
Debt Ceiling
N/A
N/A
N/A
uOptimal
80%
45%
90%
Base
0%
0%
0%
Slope1
3.3%
7%
6%
Slope2
80%
300%
60%
eMode
We recommend the ETH eMode pools start with the same parameters as Ethereum mainnet, Optimism, and Gnosis: 93% LT, 90% LTV, and 1% LB.
After the positive outcome of the ARFC Snapshot and finishing the technical preparations, we have created an AIP for the community to approve the activation of Aave v3 Scroll.
Voting will start in approximately 24 hours, participate
During the extra on-chain review performed by Certora, it has been detected that the Slope2 parameter for WETH has been mis-configured to 8% instead of 80%.
Even if the AIP description properly discloses the 8%, that is not following the previous risk recommendations and we think that should be changed to 80%, even if doesn’t cause any immediate problem.
Given that Scroll is a new pool, the POOL_ADMIN role is temporarily given to the Aave Guardian on the proposal, for situations like this. This can be used to set the parameter to the expected 80% value, avoiding extra cancellation and resubmission overhead. We will coordinate with the Guardian the change.
