[ARFC] Onboarding ETHx to Aave V3 Ethereum

ETHx

Overview

Chaos Labs supports listing ETHx on AAVE V3 Ethereum as part of the community strategy to increase the offering of Aave protocol with more LSD assets. Following is our analysis and risk parameter recommendations for the initial listing

Liquidity and Market Cap

When analyzing market cap and trading volumes of assets for listing, we look at data from the past 180 days. The average market cap of ETHx over the past 180 days is ~$30M, and the average daily trading volume is ~$130K (CeFi & DeFi).

ETHx has been live since Aug 2023 and its market cap has increased by ~$30M in the past month.

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Liquidation Threshold

Considering the volatility and the correlation of ETHx to ETH we recommend setting the LT to 77%, similar to the parameters of other LSTs on Ethereum V3.

ETHx / ETH Volatility

Supply Cap, Borrow Cap, and Liquidation Bonus

Following Chaos Labs’ approach to initial supply caps, we propose setting the Supply Cap at 2x the liquidity available under the Liquidation Penalty price impact.

Given the liquidity of ETHx we recommend a 7.5% Liquidation Bonus and a supply cap of 10,000 ETHx.

Based on our observations, the utilization rate for LSDs has been very low. Therefore, we have taken a conservative approach toward LSDs borrow caps of 1,000 ETHx. However, if there is a significant increase in demand and utilization, we will reassess the caps according to the utilization pattern.

IR Curve Parameters

We recommend aligning the interest rate parameters with those of other LSTs to ensure consistency across similar assets on Aave v3.

E-mode

Due to the asset’s limited history, we do not recommend listing ETHx on E-Mode at this time, We will re-evaluate its inclusion in the ETH-correlated category at a later stage.

Recommendations

Following the above analysis, we recommend listing ETHx with the following parameter settings:

Parameter Value
Isolation Mode No
Borrowable No
Collateral Enabled Yes
Supply Cap (ETHx) 10,000
Borrow Cap (ETHx) 1,000
Debt Ceiling -
LTV 74.50%
LT 77.00%
Liquidation Bonus 7.50%
Liquidation Protocol Fee 10.00%
Reserve Factor 15.00%
Variable Base 0.0%
Variable Slope1 7.00%
Variable Slope2 300.00%
Uoptimal 45.00%
Flahloanable Yes
Siloed Borrowing No
Borrowed in Isolation No
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