@WintermuteGovernance - to confirm, we would support Lido Alliance’s Aave v3 instance on mainnet as part of our engagement, similar to any other new Aave deployment.
Summary
We support @ACI’s proposed deployment and its looping-focused initial parameter recommendations. We expect the Lido Alliance instance to cannibalize some of Aave V3’s existing wETH and wstETH liquidity on mainnet. However, depending on incentives, it could generate new net inflows of both wETH and wstETH protocol-wide.
Additional Considerations
- Seven of the ten largest wETH depositors on Aave v3 mainnet are borrowing assets other than wstETH against it, while the remainder are deposit-only. It may be impossible to attract the former type of user to a wETH-wstETH isolated instance, given that wstETH will be the only other borrowable asset; this could limit the overall growth of this instance. Attracting non-borrowing WETH depositers will require strong deposit incentives to compensate for the lower Slope1 on the new instance.
- The migration of wETH and wstETH to the new instance will take time, and this instance will be the first of its kind. For these reasons, we recommend starting with supply and borrow caps roughly half as large as those currently proposed. Overall, this instance does not present new risks to the protocol.
- We also suggest reducing wstETH’s UOptimal to 45%, given its limited borrow demand.
Specification
| Parameter | wstETH value | wETH value |
|---|---|---|
| Isolation Mode | No | No |
| Borrowable | Yes | Yes |
| Collateral Enabled | Yes | Yes |
| Supply Cap | 650K | 900K |
| Borrow Cap | 12k | 810K |
| Debt Ceiling | NA | NA |
| LTV | 80.00% | 82.00% |
| LT | 81.00% | 83.00% |
| Liquidation Bonus | 6% | 5% |
| Liquidation Protocol Fee | 10.00% | 10.00% |
| Variable Base | 0.0% | 0.0% |
| Variable Slope1 | 3.5% | 2.50% |
| Variable Slope2 | 85% | 85% |
| Uoptimal | 45% | 90% |
| Reserve Factor | 5.00% | 10% |
| Stable Borrowing | Disabled | Disabled |
| Flahloanable | Yes | Yes |
| Siloed Borrowing | No | No |
| Borrowed in Isolation | No | No |
| E-Mode | Yes | Yes |
| E-Mode LTV | 93.5% | 93.5% |
| E-Mode LT | 95.5% | 95.5% |
| E-mode Liquidation Bonus | 1% | 1 % |