Title: [ARFC] Harmonize USDT Risk Parameters on Aave V3 Markets
Author: Aave Chan Initiative
Date: 2023-12-11
Summary
USDT has various risk parameters across the various Aave v3 markets. This proposals aims to harmonize the risk parameters to better align the markets by removing USDT from isolation mode and normalizing risk parameters.
Motivation
USDT has seen strong borrow demand across networks with borrow utilization over 50% on Aave v3 Ethereum Mainnet and good utilization on secondary networks. However, the various markets currently have different risk parameters, leading to some inefficiency.
This proposal aims to bring the various USDT markets in line with a single set of LTV, liquidation threshold, and liquidation bonus parameters.
Specification
The proposal sets the LT/LTV of USDT on all deployments at 80/77, matching that of DAI and USDC on v3 Ethereum. Regarding the LB, it will stay the same at 5% on the L2s and 4.5% on Ethereum.
| Asset | Network | Current Liquidation Threshold | New Liquidation Threshold | Current LTV | New LTV |
|---|---|---|---|---|---|
| USDT | Mainnet | 76% | 80% | 75% | 77% |
| USDT | Optimism | 80% | 80% | 75% | 77% |
| USDT | Polygon | 80% | 80% | 75% | 77% |
| USDT | Arbitrum | 80% | 80% | 75% | 77% |
| USDt | Avalanche | 81% | 80% | 75% | 77% |
| m.USDT | Metis | 80% | 80% | 75% | 77% |
Supply and borrow caps will be set on a per-market basis based on review by the risk managers.
On Avalanche this means taking LT down by 1%, which results in one account, with less the $60, eligible for liquidation.
Next Steps
- Community feedback and gather consensus
- Proceed to ARFC snapshot stage.
- If successful, escalate to AIP stage.
Disclaimer
The Aave Chan Initiative (ACI) is not compensated in any form by Tether or any affiliated entities for creating this ARFC proposal.
Copyright
Copyright and related rights waived via CC0.
