[ARFC] Deploy an Ethena Aave v3 Instance
Author: ACI
Date: 2024-08-07
ARFC updated with Risk Parameters provided by Risk Service Providers - 2024-08-14
Summary
This proposal suggests deploying an Aave v3 instance focused on providing liquidity for sUSDe and USDe holders to borrow stablecoins.
Motivation
Ethena’s USDe stablecoin has grown to over $3b TVL with success as a supply and borrow asset on the mainnet Aave v3 instance. It has also seen large demand for use as collateral on other lending protocols.
In order to capitalize on this demand, we propose deploying a dedicated Aave v3 instance for Ethena’s stablecoins and related collateral assets.
To start the instance will use sUSDe and USDe as main collateral assets, with USDC, FRAX and GHO as supply assets.
We also propose providing the Ethena instance with an initial GHO facilitator.
The goals for this instance will be to grow Aave market share for borrowers using sUSDe and USDe as well as create an additional steady revenue stream of GHO.
Specification
To further leverage synergies with friendly ecosystem participants, ACI proposes that pyUSD and FRAX to be included as non-collateral assets for the Ethena Aave instance.
Following the recent FRAX Finance AMO proposal which creates an AMO to deposit up to 100,000,000 FRAX in the Aave V3 Frax pool, it is believed this will create significant opportunities which can be capitalised on through this addition to the proposed Ethena Aave instance.
The following Risk Parameters have been updated after feedback from Risk Service Providers:
sUSDe | USDe | USDC | FRAX | pyUSD | |
---|---|---|---|---|---|
Isolation Mode | No | No | No | No | No |
Enable Borrow | No | No | Yes | Yes | Yes |
Enable Collateral | Yes | Yes | No | No | No |
E-Mode Category | Stablecoin | Stablecoin | Stablecoin | Stablecoin | Stablecoin |
Loan To Value | 72% | 72% | - | - | - |
Liquidation Threshold | 75% | 75% | - | - | - |
Liquidation Bonus | 8.5% | 8.5% | - | - | - |
Reserve Factor | - | - | 10% | 20% | 20% |
Liquidation Protocol Fee | 10% | 10% | 10% | 10% | 10% |
Supply Cap | 10,000,000 | 90,000,000 | 80,000,000 | 15,000,000 | 60,000,000 |
Borrow Cap | 0 | 0 | 72,000,000 | 12,000,000 | 54,000,000 |
Debt Ceiling | N/A | N/A | N/A | N/A | N/A |
uOptimal | - | - | 90% | 90% | 90% |
Base | - | - | 0% | 0% | 0% |
Slope1 | - | - | 5.5% | 5.5% | 5.5% |
Slope2 | - | - | 60% | 80% | 80% |
Stable Borrowing | Disabled | Disabled | Disabled | Disabled | Disabled |
Flashloanable | Yes | Yes | Yes | Yes | Yes |
Siloed Borrowing | No | No | No | No | No |
Borrowable in Isolation | No | No | No | No | No |
For the GHO facilitator, it is recommended a starting cap of 4.75M GHO (5% of total supply) and a borrow rate aligned with the main GHO facilitator.
The proposed Ethena Aave v3 instance will implement the following:
- The market will include sUSDe, USDe, USDC, FRAX, pyUSD, GHO and a new GHO facilitator. Additional assets to consider post-launch are Ethena’s Pendle PT tokens and rsUSDe.
- This GHO facilitator will be limited in size to start both to limit risk to Ethena collateral and protect liquidity and the GHO peg.
- The market will have stablecoin E-Mode to allow for high leverage borrowing between the correlated assets.
- The market will use the existing sUSDe and USDe capped oracles, so that borrowers are not affected by fluctuations in the secondary market price.
- Borrow parameters will match the mainnet Aave v3 instance, making it the most competitive location to borrow against sUSDe and USDe.
Useful Links
[TEMP CHECK] Deploy an Ethena Aave v3 Instance
[TEMP CHECK Snapshot] Deploy an Ethena Aave v3 Instance
Disclaimer
The ACI has not been compensated by Ethena for the publication of this proposal.
ACI team members are holders of sUSD, USDe and ENA.
Next Steps
- Publish a standard ARFC and collect community & service provider feedback before an ARFC snapshot.
- If the ARFC snapshot passes, publish an AIP vote for final confirmation and enforcement.
- Work with service providers and Ethena to release and promote the new Aave V3 Instance.
Copyright
Copyright and related rights waived under CC0