Summary
Chaos Labs supports listing Ethereal’s eUSDe on Aave V3’s core instance. Below is our analysis and initial risk parameter recommendations.
Overview
Ethereal is a spot and perpetual DEX built on the Ethena Network. Its inaugural phase, Season Zero, invites users to pre-deposit USDe on Ethereum L1, earning Ethereal Points, as well as 30x Ethena points, based on the size and duration of their deposits. The Ethereal points unlock a suite of benefits, including Ethena rewards, early access to future product launches, and loyalty bonuses for early supporters. In return for their deposit, users receive eUSDe—a receipt token atomically redeemable 1:1 for USDe at any time. Season Zero will run until Ethereal’s mainnet launch later this year, effectively acting as a USDe wrapper contract.
Season Zero has accumulated a considerable 900M USDe since its inception, growing exponentially over the last few months.
The eUSDe pre-deposit contract is built using the ERC-4626 token standard. While it conforms to this standard, its exchange rate is not expected to appreciate over time, as it functions purely as a wrapper for USDe without yield-bearing mechanics.
At the moment, the contract admin is a 2/3 multisig that inherits functionality to pause deposits or withdrawals. However, in alignment with the principles of protocol minimization and security, this ownership is expected to be relinquished per the above analysis, transferring control to the zero address in the near future.
Importantly, the vault contract cannot be upgraded, thereby solidifying its functionality in its current state. Any additional functionality post-launch in accordance with the protocols’ evolution will thus be present at the application layer and not systemic in nature, being fully opt-in by users.
Fully inheriting all functionality associated with USDe, eUSDe thus adheres to our comprehensive risk assessments of the Ethena Protocol and parameterization of USDe, as can be seen here. Our previous recommendation earlier today for the implementation of a USDe-designated Stablecoins E-mode can be found here.
CAPO and Oracle Implementation
We recommend leveraging the eUSDe/USDe vault exchange rate with a stable CAPO adapter, with the USDT/USD price feed utilized for the underlying USDe price. The stable CAPO adapter shall be configured in accordance with USDe’s value, as the eUSDe exchange rate is not expected to grow over time.
Specification
| Parameter | Value |
|---|---|
| Asset | 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 | eUSDe Stablecoins |
eUSDe/Stablecoin E-Mode
| Asset | eUSDe | USDC | USDT | USDS |
|---|---|---|---|---|
| Collateral | Yes | No | No | No |
| Borrowable | No | Yes | Yes | Yes |
| LTV | 90% | - | - | - |
| LT | 93% | - | - | - |
| Liquidation Bonus | 2% | - | - | - |
Disclaimer
Chaos Labs has not been compensated by any third party for publishing this recommendation.
Copyright
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