[ARFC] Onboard eUSDe PT Tokens to Aave v3 Core Instance

[ARFC] Onboard eUSDe PT Tokens to Aave v3 Core Instance

Author: ACI

Date: 2025-04-11


Risk Parameters have been updated by Risk Service Providers and ARFC has been updated accordingly 2025-04-23

Simple Summary:

The proposal aims to onboard eUSDe PT tokens to Aave V3 on Core Instance, after sucessful [TEMP CHECK] Onboard eUSDe PT Tokens to Aave v3 Core Instance and TEMP CHECK Snapshot.

Motivation/Background:

eUSDe represents deposits in Ethereal, the upcoming Ethena backed perpetual futures exchange. These can be deposited into Pendle where the yield token (YT), and the principal token (PT) are separated from the underlying. This proposal seeks to onboard the PT portion of eUSDe tokens.

We anticipate significant demand for borrowing against these PT tokens, in the low single digit billions of dollars of value and would like to take advantage of this significant opportunity.

In future, new expiries will be listed through an expedited process using the direct to AIP path.

Benefits of listing eUSDe PT tokens:

  • Significant new opportunity, with potential for large TVL growth.
  • As a first PT token to be deployed on Aave this opens up multiple other opportunities given process and infra development to accomodate this onboarding.

Market Impact:
There may be increased demand for stablecoin borrows given the size of the PT market, however we believe that this will balance out and result in net new deposits into Aave.

Chain to be deployed/listed:

The intention is to list the eUSDe PT tokens on Core Instance, more specifically:
Contract: PT-eUSDE-29MAY2025 PendlePrincipalToken | Address 0x50d2c7992b802eef16c04feadab310f31866a545 | Etherscan

Proof of Liquidity (POL) and Deposit Commitments:

Users will accrue 2x Ethena points for Ethereal eUSDe PT token deposits on Aave.

Specification

Risk Parameters have been updated by Risk Service Providers and ARFC has been updated accordingly 2025-04-23

Parameter Value
Asset PT-eUSDe
Isolation Mode No
Borrowable No
Collateral Enabled Yes
Supply Cap 150,000,000
Borrow Cap -
Debt Ceiling -
LTV 0.05%
LT 0.1%
Liquidation Penalty 7.50%
Liquidation Protocol Fee 10.00%
E-Mode Category PT-eUSDe Stablecoins

PT-eUSDe Stablecoins E-mode

Asset PT-eUSDe USDC USDT USDS
Collateral Yes No No No
Borrowable No Yes Yes Yes
LTV Subject to Risk Oracle - - -
LT Subject to Risk Oracle - - -
Liquidation Bonus Subject to Risk Oracle - - -

Initial E-mode Risk Oracle

Parameter Value
LTV 91%
LT 93%
LB 3.3%

Linear Discount Rate Oracle

Parameter Value
discountRatePerYear (Initial)
7.87%
maxDiscountRatePerYear 39.22%

Useful Links:

Disclaimer:

The Aave Chan Initiative is independent and has not received any form of compensation from related parties for the drafting of this proposal. Some ACI team members may hold tokens from the Ethena ecosystem.

Next Steps:

  1. Publication of a standard ARFC, collect community and service provider feedback before escalating the proposal to the ARFC Snapshot stage.
  2. If the ARFC Snapshot outcome is positive, publish an AIP vote for final confirmation and enforcement of the proposal.

Copyright:

Copyright and related rights waived under CC0.

For reference, we have published a technical analysis of the eUSDe underlying of this PT token on [ARFC] Onboard eUSDe to Aave v3 Core Instance - #3 by bgdlabs

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Overview

In alignment with our Principal Token Risk Oracle framework—outlined in detail here—we present our risk parameter recommendations for the proposed maturity and underlying asset listing: PT-eUSDE-29MAY2025. Leveraging the dynamic linear discount rate oracle implementation, we also provide our recommended values for initialDiscountRatePerYear and maxDiscountRatePerYear, derived from the extended methodology detailed here.

Risk Oracle Parameter Evolution

Through our rigorous quantification of the algorithm, we find that the integration risk decays as the PT approaches maturity. This dynamic justifies the use of progressively more conservative risk parameters over time. Taking into account the underlying proposed configuration of USDe E-mode within Aave, we outline the projected evolution of the LT, LTV and LB, with the initial parameterization approximately as follows:

LTV: 91%

LT: 93%

LB: 3.3%

Note that this parameterization explicitly refers to E-mode such that the PT can only borrow correlated assets, while effectively disallowing uncorrelated debt assets to be borrowed. The LTV and LT will remain constant throughout given the relatively short time until maturity, as is capped by the underlying, with the LB continuing to decay over time until maturity.

The yield trading component of the PT stems from Ethereal’s Season Zero Points, as well as 30x Ethena points. The underlying asset for PT-eUSDe is simply USDe, thus the aggregate oracle configuration does not include the exchange rate of sUSDe/USDe and simply references the PT linear discount rate oracle implementation alongside the USDT/USD pricing of USDe. As such, the underlying configuration will be derived in accordance with a minimum liquidation bonus of 2% and maximum liquidation threshold of 93% for the underlying, per our recommended parameterization for a USDe stablecoins E-mode here.

Initial Discount Rate Per Year and Maximum Discount Rate Per Year

Based on historical observed data and the pricing configuration of the market, our initial recommendations for the discountRatePerYear and maxDiscountRatePerYear are as follows:

Initial discountRatePerYear: 7.87%

maxDiscountRatePerYear: 39.22%

If pricing dynamics change until its listing, such that discountRatePerYear will require a refresh, we will institute such a change accordingly upon listing.

On-chain Liquidity and Initial Cap

With the relevant debt assets necessitating the leveraging of on-chain liquidity for both the underlying asset and Pendle AMM liquidity, PT-eUSDE-29MAY2025 employs significant on-chain liquidity. The plot below represents the amount of liquidity available under 3% slippage as the market approaches expiry, given the current liquidity distribution in the AMM. As the market matures and moves closer to expiry, the slippage associated with swapping PT becomes less extreme. This trend is especially pronounced for assets with lower scalarRoot values, i.e. a greater expected implied yield fluctuation, and they tend to have more variance in liquidity concentration. Supported by deep on-chain liquidity in the Pendle AMM, at the current time to maturity, the market currently facilitates swaps of up to $175M with less than 3% slippage.

Specification

Parameter Value
Asset PT-eUSDe
Isolation Mode No
Borrowable No
Collateral Enabled Yes
Supply Cap 150,000,000
Borrow Cap -
Debt Ceiling -
LTV 0.05%
LT 0.1%
Liquidation Penalty 7.50%
Liquidation Protocol Fee 10.00%
E-Mode Category PT-eUSDe Stablecoins

PT-eUSDe Stablecoins E-mode

Asset PT-eUSDe USDC USDT USDS
Collateral Yes No No No
Borrowable No Yes Yes Yes
LTV Subject to Risk Oracle - - -
LT Subject to Risk Oracle - - -
Liquidation Bonus Subject to Risk Oracle - - -

Initial E-mode Risk Oracle

Parameter Value
LTV 91%
LT 93%
LB 3.3%

Linear Discount Rate Oracle

Parameter Value
discountRatePerYear (Initial)
7.87%
maxDiscountRatePerYear 39.22%

Disclaimer

Chaos Labs has not been compensated by any third party for publishing this recommendation.

Copyright

Copyright and related rights waived via CC0

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Summary

LlamaRisk offers tentative support for the ARFC to onboard PT eUSDe-29-May-2025 to the Aave v3 Core instance. This support is conditional on the Aave DAO’s assessment of whether the technical integration effort is justified by the asset’s limited remaining maturity of 39 days.

Analysis indicates that the underlying eUSDe token’s yield stems from accruing Ethereal points, with a future token launch potentially impacting their value. The PT eUSDe yield is fixed based on a purchase discount. Demand is driven by yield and speculative interest in future incentives despite recent moderation in returns.

With only 39 days until maturity, the implied PT yield has been trending downwards, mirroring broader market conditions and potentially waning interest in the speculative points program. The absence of other eUSDe PT maturities suggests that the Ethereal points program may be nearing its conclusion, raising questions about Aave’s long-term utility and user interest.

ChaosLabs will provide specific parameter recommendations and details regarding the pricing oracle in a separate update.

Assessment of PT base asset: Link
Considered PT asset maturities: eUSDe-29-May-2025

Asset State

Underlying Yield Source

The yield mechanism for eUSDe involves holding the token to accrue Ethereal points, which provide an additional layer of rewards, potentially convertible to tokens or other benefits in future launches. It should be noted that the value and longevity of Ethereal points depend on Ethereal’s success and tokenomics, with a token launch expected in May 2025.

For eUSDe PT tokens, the yield is implied through buying at a discount and redeeming at par value at maturity, as is typical in Pendle Finance’s principal token structure. The PT token represents the right to redeem the underlying eUSDe at maturity, capturing the fixed yield based on the discount at purchase.

Underlying utility

Investor demand for eUSDe and its PT instrument stems primarily from yield considerations and speculative positioning around future incentives. In February and March, the Pendle pool offered headline annual percentage rates close to 14%; since then, returns have moderated to about 4.5% for Pendle liquidity providers, with Euler’s supply APY currently below 4%. Even at these lower levels, participants remain attracted by the possibility of amplifying their Ethena rewards multiplier, which can translate into additional Ethereal points and potential future airdrops or related benefits. This speculative layer complements the intrinsic yield, creating some users who consider valuable optionality. Finally, eUSDe benefits indirectly from the broader market footprint of its underlying asset, USDe, whose established liquidity base helps draw capital into both the spot token and PT derivatives.

Underlying Stability

The underlying eUSDe is a receipt token for USDe deposited in Ethereal’s spot and perpetual trading platform. At the time of writing, Ethereal DEX has not been launched yet, and USDe deposits serve purely for bootstrapping the initial supply in the platform. The USDe deposits can be redeemed at a 1:1 ratio at any time without a cooldown period. Moreover, the deposits in the vault are idle and are not used as a risk coverage layer for the protocol. All of this makes the eUSDe token inherit equivalent stability risks as the USDe token. Therefore, nations’ supposed asset yield flux are,e based purely on the nature of the speculative rewards program.

In turn, the secondary market peg of USDe has remained stable after the last stress instance during the Bybit exploit incident. The secondary market discount of USDe has not exceeded 20 bps since then.


Source: LlamaRisk, April 19th, 2025

Total Supply

Since the beginning of April, as the pool has matured and market conditions have changed, the SY eUSDe supply has subdued at ~730M. At the same time, available pool liquidity has been slowly reducing and flattened at ~200M. The difference between these values roughly represents the supply of PT eUSDe, with PT eUSDe being part of the available liquidity amount. This equates to a total PT eUSDe supply of 550M tokens.


Source: LlamaRisk, April 19th, 2025

Holders

The PT eUSDe token holder distribution reveals a notably high concentration among a few addresses. The top 10 holders collectively control approximately 91% of the total token supply. More than 30% of the token eUSDe PT supply ($176M) currently resides on Morpho. The second and third largest holders are not contracts. However, their identities cannot be attributed to a particular entity/project/team.


Source: Etherscan, Date: April 15th, 2025

Liquidity

As mentioned above, the eUSDe pool maintains an estimated liquidity of $204.19M. More than 90.5% of that amount is currently held in SY eUSDe, while the remaining 9.5% is in PT eUSDe tokens.


Source: Pendle, April 19th, 2025

The market’s order book composition indicates lower trading activity, with a bid-ask spread at 0.5% of implied yield. These observations also align with the lower broader market activity since the beginning of April.


Source: Pendle, April 19th, 2025

The PT-eUSDe-29-May-2025 pool has the following parameters:

Parameter Value
Liquidity Yield Range 8.5% - 38.5%
Fee Tier 0.14%
Input Tokens $USDe, $eUSDe
Output Tokens $USDe, $eUSDe
Reward Tokens $PENDLE

Market State

Price and Yield

At the time of writing, there rremain39 days until the tool’s maturity. The implied PT yield is at 7.8% APY with the PT price of 0.9916. The implied PT yield and the LP yield have been trending down since the pool’s inception, representing worsening broader market conditions and fading speculative points program interest.

Maturities

The eUSDe PT matures on May 29th, 2025, with 39 days left until maturity at writing. No other PT pools with different maturities are available, which suggests that the Ethereal eUSDe points program is approaching its end. This questions the utility for Aave DAO and user interest in case of potential PT token deployment on the Core instance.

Integrated Venues

PT Ethereal eUSDE-29-May-2025 is also present on Morpho and Euler. On the Morpho lending platform, 175M tokens are currently supplied to 3 different vaults as collateral, non-borrowable. On Euler, 20.77M tokens are supplied and used as collateral only.


Source: Pendle, April 19th, 2025

Recommendations

Aave Market Parameters

Presented jointly with @ChaosLabs. Other parameters will be handled via Risk Oracle.

Price Feed

For pricing PT tokens on Aave, a specific dynamic linear discount rate oracle has been developed by BGD Labs. It is recommended that PT eUSDe tokens would be priced using it. In addition, due to full direct redemption availability, eUSDe would be priced on par with USDe, therefore using USDe’s standard pricing mechanism on Aave’s markets.

Disclaimer

This review was independently prepared by LlamaRisk, a community-led 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.

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