# \[ARFC\] Add bCSPX to Aave V3 Gnosis Instance **URL:** \ **Category:** New Asset\ **Created:** [February 17, 2025, 7:37am UTC](https://governance.aave.com/t/arfc-add-bcspx-to-aave-v3-gnosis-instance/21113 "2025-02-17T07:37:42Z")\ **Posts on this page:** 1\ **Showing post:** 9
**Author:** ![ChaosLabs](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/chaoslabs/32/6850_2.png) [@ChaosLabs](https://governance.aave.com/u/ChaosLabs)\ **Post date:** [February 25, 2025, 1:35pm UTC](https://governance.aave.com/t/arfc-add-bcspx-to-aave-v3-gnosis-instance/21113/9 "2025-02-25T13:35:11Z")
## **Overview** Chaos Labs supports listing bCSPX on Aave V3’s Gnosis instance. Below is our analysis and initial risk parameter recommendations. ## **bCSPX** bCSPX is an ERC-20 token designed to track the iShares Core S&P 500 UCITS ETF USD, issued as an open-ended Tracker Certificate under Jersey law and the Swiss DLT act. There is no fixed maturity, though it can be redeemed by a holder or terminated by the issuer with 30 business days’ notice. The tokenizer is Backed Finance AG, brokerage and custody are provided by Maerki Baumann & Co. AG and InCore Bank AG, and the security agent is Security Agent Services AG. Backed Finance has the authority to execute minting, burning, turn on and off the relay function (pre-approve the transfer of tokens using a signed message, the transaction can then be executed using a different account), and use the updating function, which can migrate tokens to a new network or introduce freezing and/or burning functions. Backed is also able to pause all transactions. The product is collateralized through the purchase of the underlying equities, in which proceeds from an investor buying the product are used to purchase. There is a 0.50% fee for minting and redeeming the token. The underlying ETF has a per year 0.07% management fee and 0.02% transaction fee. The token can be minted by pre-KYCd professional investors and can be redeemed by any KYCd holder. The minimum mint is CHF 5,000; there is a limit on total issuance volume set to CHF 100M, though this can be raised if needed. Minting is facilitated by a 2-of-3 [multisig](https://gnosisscan.io/address/0xFE4c27E80e0E1Cd11AAbCC27432e684C73C832F3), designated as the Minter on the bCSPX’s contract, which sends pre-minted tokens — tokens that exist on-chain but have not been collateralized and activated — to the Backed Deployer wallet. Most recently, on January 19, 2025, it pre-minted 3,000 bCSPX. This address is also designated as the Pauser. The Burner is set to the Backed Deployer, currently the second largest bCSPX holder on Gnosis at 27.8% of the total supply. To mint the token, a user must undergo KYC procedures and submit a purchase order to Backed, after which Backed receives payment and submits a creation order. The issuer uses the payment (less fees) to purchase the underlying; if this is successful, the tokens are activated and transferred to the designated wallet. If the assets are not bought in time, the purchase is canceled, and the funds are returned. If Backed decides to discontinue bCSPX for any reason, they can exercise their “Issuer Call Option” by giving notice to investors at least 30 business days before the termination date. This decision can be based on several factors, such as illiquidity of the underlying asset, regulatory changes, increased costs, taxation, or technological risks, and may result in a redemption amount that is significantly lower than the original issue price. In the event that this process is triggered, we would likely recommend gradual reductions in LT over the course of the 30-day period. To request a redemption, an investor must go through KYC procedures, after which they forward the redemption order to the issuer, which then has five business days to deactivate the received tokens by transferring them to a designated wallet. They then liquidate the underlying according to the amount of tokens deactivated, calculate a redemption amount, and instruct the Paying Account Provider (Maerki Baumann or InCore Bank) to pay the redemption amount, less fees. In case of a redemption to stablecoin, the issuer transfers the redemption amount, less fees, directly to the investor’s wallet. ### **Market Cap and Liquidity on Gnosis** bCSPX currently has a total supply of 8,622 on Gnosis, representing an on-chain market cap of $5.6M. It has 136 unique holders, with the Backed Deployer holding 2,403 tokens. There has been a steady upward trend in liquidity following a sharp uptick in mid-January; its largest liquidity pools are paired with sDAI. ![image - 2025-02-25T152421.586](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/5/57e240e316aa823a2b2e2df705481c8914247546.png) ### **Volatility** The underlying asset has low volatility relative to crypto-native assets listed on Aave. Since liquidity has improved, bCSPX has more closely tracked the underlying, with a 30-day daily annualized volatility of 14.48%. ![image - 2025-02-25T152424.683](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/6/62c8583eba3c63764a1dfaccbea12a962bdee532.png) ### Pricing There is currently no Chainlink price feed available for the asset on Gnosis, while the Ethereum CSPX price feed is subject to a 15-minute delay and uses a 2% deviation threshold. Moreover, the data may be derived from a value in the middle of the bid-ask spread at market open, recording a price where no or minimal trades have actually occurred. This culminates in the Chainlink feed returning very large price changes relative to previous updates, with multiple updates of more than 15%. ![image - 2025-02-25T152428.276](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/1/1fe42610fdc56dd83f605895f3b735fe9a943536.png) These price spikes additionally appear to reflect anomalous data provided by certain data providers, such as TradingView, shown below. ![image - 2025-02-25T152439.107](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/0/03d7c0a7bbb5aebcba4207b92da0a54db696fd66.png) While sufficiently conservative parameters may prevent bad debt, stale and incorrect prices triggering significant updates can erode the liquidation incentive, delaying liquidations in extreme cases. Furthermore, we cannot rule out the possibility of a more severe temporary price spike that, through deviation scaling beyond a certain threshold, could lead to deliberate arbitrage and, thus, bad debt. Accurately assessing the value of the underlying asset as collateral in a lending market and forecasting the potential adverse consequences of artificial volatility across the ecosystem remains infeasible, especially when considering that the price spike occurs at the same time every day. Instead, until Chainlink fixes the bCSPX/USD feed, we propose that Aave utilize the [SPY/USD feed](https://data.chain.link/feeds/arbitrum/mainnet/spy-usd) (currently deployed on Arbitrum), which tracks the more liquid SPY and uses a deviation threshold of 0.5%. This leads to more stable and fresher pricing with no extremely large updates as seen in the CSPX oracle; SPY’s maximum change between updates was 3.22%, well within a volatility-minimized range per the distribution below. ![image - 2025-02-25T152442.332](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/1/1b4bfe607238707ce158e1abf82980dc2c84781b.png) SPY is currently priced 6.9% lower than CSPX because the latter accumulates dividends in its stock price. This underpricing does not pose a risk to Aave with the selected listing parameters, as it will essentially reduce the asset’s borrowing power. Below is charted the ratio of SPY to CSPX over time, showing how the ratio has fallen from 1.00 in 2021 to 0.9411 in 2025. In 2024, the ratio declined by 1.37%. ![image - 2025-02-25T152445.672](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/7/775596375f20facf40442679da65afabe1f4e1cf.png) Moreover, modifying the current [bCSPX PoR feed](https://data.chain.link/feeds/polygon/mainnet/bcspx-por) on Polygon to deviate from a total underlying calculation to alternatively reflect a readable representation of asset collateralization would be a nice multiplicative addition to the SPY/USD feed. However, as mentioned previously, the minting process can deliberately lead to undercollateralized (pre-minted) nominal shares while minting is performed across chains, thereby making this quantification non-trivial. ### **LTV, Liquidation Threshold, and Liquidation Bonus** Given the factors mentioned above, in which there is some friction in redeeming the asset, we recommend setting its Liquidation Bonus to 10%. Taking this LB into account, we recommend setting its LT to 72% and LTV to 68%. ### **Supply and Borrow Caps** According to our usual methodology, we recommend setting the asset’s supply cap at 2x the amount of liquidity available at a price impact equivalent to the Liquidation Bonus, which leads to a recommendation of 4,000 bCSPX. Given the likelihood of price dislocations arising from underpricing in expectation, we do not recommend allowing borrowing of the asset. Collateralized bCSPX debt positions would not be liquidated efficiently due to significant debt underpricing. ## Specification Following the above analyses, we have aligned with @LlamaRisk on the following parameters: | Parameter | Value | | --- | --- | | Asset | bCSPX | | Instance | Gnosis | | Isolation Mode | No | | Borrowable | No | | Collateral Enabled | Yes | | Supply Cap | 4,000 | | Borrow Cap | - | | Debt Ceiling | - | | LTV | 68.00% | | LT | 72.00% | | Liquidation Penalty | 10.00% | | Liquidation Protocol Fee | 10.00% | | Variable Base | - | | Variable Slope1 | - | | Variable Slope2 | - | | Uoptimal | - | | Reserve Factor | - | | Stable Borrowing | Disabled | | Flashloanable | Yes | | Siloed Borrowing | No | | Borrowable in Isolation | No | | E-Mode Category | N/A | # **Disclaimer** Chaos Labs has not been compensated by any third party for publishing this recommendation. # **Copyright** Copyright and related rights waived via [CC0](https://creativecommons.org/publicdomain) --- _[View the full topic](https://governance.aave.com/t/arfc-add-bcspx-to-aave-v3-gnosis-instance/21113)._