[ARFC] Harmonize USDT Risk Parameters on Aave V3 Markets

Title: [ARFC] Harmonize USDT Risk Parameters on Aave V3 Markets

Author: Aave Chan Initiative

Date: 2023-12-11


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.


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.


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

  1. Community feedback and gather consensus
  2. Proceed to ARFC snapshot stage.
  3. If successful, escalate to AIP stage.


The Aave Chan Initiative (ACI) is not compensated in any form by Tether or any affiliated entities for creating this ARFC proposal.


Copyright and related rights waived via CC0.


We support the proposal, aligning risk parameters for USDT across all V3 deployments and enabling its use outside of isolation mode.


Gauntlet is supportive of the recommended LT and LTV changes to the v3 markets. The increase of LT from 76% to 80% should have minimum risk impact to the protocol with USDT borrow usage at 3.5%. The removal of USDT in isolation mode across Polygon, Arbitrum, and OP v3 markets should have little impact on capital efficiency with USDT having low usage within the non-isolated markets. Should the community wish to remove USDT from isolation on all markets, Gauntlet would like to reassert the centralization risk associated with USDT. Our risk evaluation remains consistent with those articulated in our previous USDT recommendation.

Accoding to Tether Q3 Attestation, USDT is not financially backed 1:1 by cash and cash equivalents but more like 0.86:1.

Screenshot 2023-12-11 at 2.23.57 PM


This proposal has been escalated to the ARFC snapshot stage

Vote starts tomorrow.

Following ARFC Snapshot supervision, the following ARFC Snapshot has passed, with both quorum of 320K votes of YAE votes and 320K YAE votes.

Next step will be the publication of the AIP

This topic was automatically closed 30 days after the last reply. New replies are no longer allowed.