Proposal updated to reflect risk service providers feedback
Title: [ARFC] CRVUSD Onboarding on Aave V3 Ethereum Pool
Author: @marczeller - Aave-chan Initiative
Date: 19-10-2023
Summary
This ARFC proposes the onboarding of the CRVUSD stablecoin, minted by the Curve Protocol, into the Aave V3 Ethereum pool.
Motivation
CrvUSD is a USD-peg stablecoin minted by the Curve Protocol. While it’s relatively young, it has grown to a circulating supply of over $130M with strong peg resilience. Onboarding this asset into Aave will:
Reinforce synergies between Aave and Curve.
Offer Aave users an additional decentralized stablecoin option matching the ACI diversity support ethos.
Strengthen the relationship between the CRVUSD & the GHO stablecoins.
As the primary usecase for stablecoins is to be deposited by users looking for a passive yield and used as a borrowable asset and not as much as a collateral asset, the ACI proposes a CRVUSD onboarding outside isolation mode but without collateral properties.
Following CrvUSD maturity, the Aave governance can propose a collateral activation for crvUSD at a later stage.
Chaos Labs supports listing CRVUSD with collateral disabled as part of an overarching strategy to increase the offering of AAVE protocol with diversified stablecoins.
Liquidity and Market Cap
The CRVUSD token was introduced by Curve a few months ago, and since its launch, its TVL has increased to approximately $180 million.
When analyzing market cap and trading volumes of assets for listing, we look at the available historical data. The average market cap of CRVUSD is ~$106M, and the average daily trading volume is ~$52M (CeFi & DeFi).
We recommend listing CRVUSD with collateral disabled to allow a more controlled launch for the asset. We leave collateral enablement to a future date, pending future community vote and CRVUSD maturity.
In addition, we recommend listing CRVUSD with Borrowed in Isolation disabled. Enabling Borrowed in Isolation introduces risk to the isolated assets due to the correlation between the volatility of the isolated asset and that of the borrowed asset.
Recommendations
Following the above, we recommend listing CRVUSD with the following parameter settings:
Should the community wish to list CRVUSD, Gauntlet recommends the following parameters. We give further color below.
Parameters
Parameter
Recommendation
Isolation Mode
N/A
Borrowable
YES
Borrowable in Isolation
YES
Collateral Enabled
NO
Stable Borrowing
NO
Supply Cap
48m
Borrow Cap
40m
Debt Ceiling
N/A
LTV
N/A
LT
N/A
Liquidation Bonus
N/A
Liquidation Protocol Fee
10%
Reserve Factor
10%
Base Variable Borrow Rate
0
Variable Slope 1
0.06
Variable Slope 2
0.8
Uoptimal
0.8
Initial Supply and Borrow Caps
CRVUSD circulating supply is ~$120m. Given CRVUSD is a new asset listing, we recommend adoping our conservative approach for setting supply and borrow caps for CRVUSD, which gives room to expand caps should cap usage be elevated. We recommend supply cap of 48m and borrow cap of 40m.
Variable Borrow Rate
We recommend setting slope 1 to 6% instead of 5%, given the weighted average CRVUSD borrow rate across Curve is ~6.5% and Silo is >7%.
Borrowable in Isolation
Gauntlet does not see excess risk with enabling CRVUSD being borrowable in isolation. CRVUSD If the community wishes to take a more conservative stance, it may wish to only limit CRVUSD borrowing to non-isolated collateral.
