Summary
LlamaRisk supports the proposal to onboard sUSDe on Aave’s Base market instance. The Base market is ready for onboarding its first yield-bearing stablecoin even though currently, it is primarily used for leverage looping ETH LSTs. However, the current supply of sUSDe on Base is minimal, and risks of liquidity stability are persistent. It remains to be seen if the demand for sUSDe is apparent on this L2 chain where sUSDe’s supply has recently been bootstrapped. Therefore, we recommend onboarding it with a conservative setup.
A similar setup resembling Aave’s Core market would be used to onboard sUSDe, incorporating a sUSDe Stablecoins E-Mode, albeit with more conservative parameters. The exact recommended parameters have been agreed upon and will be shortly presented by ChaosLabs.
Ethena’s Current State
After renewed growth, Ethena’s total USDe supply has reached $6B. Part of the growth can be attributed to the successful integration of sUSDe into Aave’s Core market. Seeking to continue the development of the protocol, Ethena has issued the USDtb RWA stablecoin backed by U.S. treasury fund products, which serves as a yield-bearing product that helps to anchor the floor yield of sUSDe to traditional market rates. More recently, Ethena announced plans to expand more broadly to the TradFi space, introducing iUSDe, a product designed to export sUSDe in regulated offerings.
Source: LlamaRisk’s Ethena Risk Dashboard, February 13th, 2025
Supply
The total supply of USDe stands at 6B, with 66.5% staked to sUSDe, equating to a total sUSDe supply of 4B. The ratio of USDe supply staked in sUSDe is down to 66.5% from the high of 76%, which results in a slightly higher boost of sUSDe’s yield.
Source: LlamaRisk’s Ethena Risk Dashboard, February 13th, 2025
Focusing on the sUSDe’s supply on Base, it can be observed that the supply on this chain has only recently been bootstraped, with 3.1m sUSDe ($3.56m) available. This figure was reached in one month, but the exact reasons for this inflow are unknown.
Source: Dune, February 13th, 2025
The vast majority, ~98% of all sUSDe supply on Base, is concentrated in two contracts: DEX pools on a recently deployed InfinityPools DEX on Base with 2 pools and a TVL of $6.5m. InfinityPools DEX contracts have been audited by Cantina and ABDK.
Source: Etherscan, February 13th, 2025
Utility & Stability
The current muted funding rates environment has lowered the yields of sUSDe tokens, leading to decreased utilization of the tokens in the yield venues. The harsher funding rates environment and reduced Open Interest levels have also resulted in Ethena unwinding part of the perpetual positions and moving a larger part of USDe backing to stablecoins. At the time of writing, the stablecoin portion amounts to $2B.
Source: LlamaRisk’s Ethena Risk Dashboard, February 13th, 2025
The protocol has maintained the recommended levels of reserve fund capital, which currently stands at $60.5m. It provides a 1% over-collateralization buffer for USDe stablecoin.
Source: LlamaRisk’s Ethena Risk Dashboard, February 13th, 2025
Liquidity on Base
DEX Liquidity
As mentioned above, all of the sUSDe’s liquidity is concentrated in InfinityPools DEX LPs. The first is the sUSDe/USDC pool, which has a TVL of $4.5m and offers an APY of 9% over the past 7 days. The second one is the sUSDe/wstETH pool with a TVL of $1.8m and a 7-day APY of 14.3%.
Source: InfinityPools DEX, February 13th, 2025
Source: InfinityPools DEX, February 13th, 2025
Low levels of liquidity result in 700k sUSDe being available to be sold for USDC within a 3.6% price impact. This should prompt a conservative initial supply cap for sUSDe.
Source: InfinityPools DEX, February 13th, 2025
Yield Venues
No other yield venue integrations have been observed on the Base chain. This could represent a market opportunity for Aave, where the integration of the lending market could be the leading factor for the growth of the supply of sUSDe on Base.
Aave V3 Specific Parameters
Will be jointly discussed with @ChaosLabs.
Disclaimer
This review was independently prepared by LlamaRisk, a community-led non-profit decentralized organization funded in part by the Aave DAO. LlamaRisk serves as a member of Ethena’s risk committee. LlamaRisk did not receive compensation from the protocol(s) or their affiliated entities for this work.
The information provided should not be construed as legal, financial, tax, or professional advice.