Summary
LlamaRisk supports the initial parameters and the setup of the market for the deployment of Aave V3 on X Layer. An initial $12M has been earmarked to bootstrap liquidity on the network. We have determined that this is sufficient to support liquidations and scaling under the parameters proposed.
We agree with the proposed launch of the X Layer instance with the strategic subset of assets presented. While some initial assets will be made available within standard market configurations limited to stablecoin borrowing, specialized E-modes will enable targeted risk mitigation and improved capital efficiency for highly correlated assets. Therefore, the sole recommendation is to exclude E-Modes 1, 2, and 3 from the initial setup in order to avoid duplication of collateral-borrow paths.
Initial Setup
The X Layer instance will utilize a hybrid model, supporting both general market borrowing and specialized E-mode configurations. The stablecoin market will be anchored by USDT0, USDG, and GHO.
The primary collateral set will consist of xAssets - native to X Layer - including xETH, xSOL, xOKSOL, xBETH, and wOKB. To maximize capital efficiency while isolating risk, these will be supported by LST-correlated E-modes, allowing high-efficiency loops between liquid staking tokens and their underlying assets.
xAssets represent approved asset types on the Asset Class Allowlist, such as wrappers and LSTs. Additionally, correlated xAsset E-modes will be introduced to enable potential leveraged staking use cases.
Chain-Specific Asset Evaluations
Note: xAssets are yet to be onboarded on other Aave markets; these assets have been analysed in-depth within our asset review framework and presented in separate responses on this forum thread.
USDT0
USDT0 serves as the canonical representation of USDT on X Layer.
- Standard: LayerZero’s OFT standard.
- Mechanism: Uses a lock-and-mint architecture on Ethereum Mainnet (via
OFTAdapter), ensuring 1:1 backing and cross-chain interoperability without fragmented liquidity pools. - Access Controls: The contract is an upgradable OpenZeppelin Transparent Proxy. Ownership and ProxyAdmin functions are controlled by a 3/5 Safe Multisig, with the OFT Contract acting as the authorized minter/burner adapter.
Total supply of the asset currently sits at 53M. The initial liquidity of the asset is yet to be bootstrapped sufficiently; the largest pool (Curve V3 USDC/USDT0) currently sits with approximately $731K in USDT0.
Source: X Layer Explorer, February 14th, 2026
USDG
USDG is a natively issued on X Layer by Paxos.
- Standard: OpenZepplin Universal Upgradeable Proxy Standard (ERC1967).
- Mechanism: The
SupplyControlcontract manages the access control system for token minting and burning on X Layer. USDG is minted through a chain-native off-chain control system, with 1:1 reserves held in cash and short-duration U.S. government instruments. - Access Controls: owned by an IERC5313-style Admin address, using four role-based access controls, each controlled by Paxos’
defaultAdminaddress backed by proprietary offline HSMs that enforce multi-person approvals.
The total supply of USDG on X Layer is 279M, with the majority of the supply held by an OKX Cold Wallet address. The largest liquidity source is a Uniswap USDG/USDT0 pool, which holds 424K.
Source: X Layer Explorer, February 14th, 2026
Asset Liquidity
The heuristics used to determine adequacy for initial supply and borrow caps are based on the following:
- Projected Price Impact: Based on the $12M in expected liquidity, we anticipate that once deployed, liquidity will be sufficient to support a target price impact threshold of 5-7.5% for collateral assets.
- Contingency on deployment: The proposed parameters and caps outlined in this document are valid for the initial deployment phase only. A final validation of realized liquidity depth and DEX router efficiency will be required post-deployment to ensure that the Aave Effect and committed bootstrapping efforts meet the necessary safety requirements for scaling.
- Correlated E-Modes: In this deployment, assets will be grouped into specific E-Modes to safely maximize efficiency. This limits borrowing to stablecoins and LSTs (xBETH and xOKSOL) that can be used to borrow their respective underlying assets (ETH and SOL)
| Asset | Committed Liquidity | *Current DEX Pools | Proposed Supply Caps |
|---|---|---|---|
| USDT0 | USDT0 / USDG – $2MxBTC / USDT0 – $2MOKB / USDT0 – $2MxETH / USDT0 – $2MxSOL / USDT0 – $2M | USDC/USD₮0 - $1.1MUSD₮0 / WOKB - $883.1KUSD₮0 / WOKB - $174KxBTC / USDT0 – $899.2KxETH / USDT0 – $829.9KxSOL / USDT0 – $779K | 50,000,000 ($50M) |
| USDG | USDT0 / USDG – $2M | USDT0 / USDG – $983.7K | 5,000,000 ($5M) |
| xBTC | xBTC / USDT0 – $2M | xBTC / USDT0 – $899.2K | 60 (~$4.2M) |
| WOKB | wOKB / USDT0 – $2M | USD₮0 / WOKB - $883.1KUSD₮0 / WOKB - $174K | 22,000 (~$1.65M) |
| xETH | xETH / USDT0 – $2MxBETH / xETH – $1M | xETH / USDT0 – $829.9KxBETH / xETH - $656.9K | 2,400 (~$5M) |
| xSOL | xOKSOL / xSOL – $1MxSOL / USDT0 – $2M | xSOL / USDT0 – $779KxOKSOL / xSOL - $540.8K | 17,000 (~$1.41M) |
| xBETH | xBETH / xETH – $1M | xBETH / xETH - $656.9K | 1,200 (~$2.5M) |
| xOKSOL | xOKSOL / xSOL – $1M | xOKSOL / xSOL - $540.8K | 13,000 (~$1.1M) |
*Current DEX liquidity as of February 14th, 2026
The following commitments have been confirmed with strategic partners to ensure sufficient liquidity at launch. We further expect that targeted incentive programs, as well as DEX launches, will immediately grow the liquidity TVL at the time of deployment.
Parameter Recommendations
LlamaRisk supports the initial parameters for the deployment proposed by TokenLogic, with a sole recommendation to exclude E-Modes 1, 2, and 3 from the initial setup in order to avoid duplication of collateral-borrow paths. In addition, we recommend the following Chainlink price feeds to be used on this market:
- ETH/USD; to price xETH and as a basis to price xBETH, in conjunction with xBETH internal exchange rate.
- SOL/USD (under development): to price xSOL and as a basis to price xOKSOL, in conjunction with xOKSOL internal exchange rate.
- OKB/USD: to price WOKB.
- BTC/USD: to price xBTC.
- USDG/USD: to price USDG.
- USDT0/USD: to price USDT0.
Other parameters, such as the CAPO limits are to be presented jointly 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 is not directly affiliated with the protocol(s) reviewed in this assessment and did not receive any 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.