# ARFC: Onboarding wETH to Aave V3 Celo Instance
**URL:** https://governance.aave.com/t/arfc-onboarding-weth-to-aave-v3-celo-instance/21750
**Category:** Governance
**Created:** [April 9, 2025, 10:05am UTC](https://governance.aave.com/t/arfc-onboarding-weth-to-aave-v3-celo-instance/21750 "2025-04-09T10:05:44Z")
**Posts on this page:** 5
**Page:** 1
### Author:  [@ACI](https://governance.aave.com/u/ACI)
#### Post date: [April 9, 2025, 10:05am UTC](https://governance.aave.com/t/arfc-onboarding-weth-to-aave-v3-celo-instance/21750/1 "2025-04-09T10:05:44Z")
## [ARFC]:Onboarding wETH to Aave V3 Celo Instance
### **Author: ACI**
### **Date: 2025-04-09**
> Risk Parameters have been provided by Risk Service Providers and ARFC has been updated accordingly. 2025-04-16
* * *
### Summary
This ARFC proposes the onboarding of Wrapped Ether (wETH) as a supported asset on the Aave V3 Celo Instance. The integration aims to expand the protocol’s utility and provide users with additional opportunities for lending and borrowing.
### Motivation
The addition of wETH to Aave V3 on Celo would:
- Increase TVL and protocol revenue
- Provide users with a major DeFi asset for lending/borrowing
- Enable cross-chain strategies involving ETH
- Enhance the protocol’s competitive position in the Celo ecosystem
### Specification
> Risk Parameters have been provided by Risk Service Providers and ARFC has been updated accordingly. 2025-04-16
| **Parameter** | **Value** |
| --- | --- |
| Asset | WETH |
| Isolation Mode | No |
| Borrowable | Yes |
| Collateral Enabled | Yes |
| Supply Cap | 500 |
| Borrow Cap | 450 |
| Debt Ceiling | - |
| LTV | 78.00% |
| LT | 80.00% |
| Liquidation Penalty | 7.50% |
| Liquidation Protocol Fee | 10.00% |
| Variable Base | 0.0% |
| Variable Slope1 | 2.7% |
| Variable Slope2 | 80.00% |
| Uoptimal | 90% |
| Reserve Factor | 15% |
| Stable Borrowing | Disable |
| Flashloanable | Enabled |
| Siloed Borrowing | Disabled |
| Borrowable in Isolation | Disabled |
| E-Mode Category | N/A |
Celo-native bridged [wETH Contract Address:](https://celoscan.io/token/0xd221812de1bd094f35587ee8e174b07b6167d9af) 0xd221812de1bd094f35587ee8e174b07b6167d9af
### Disclosure
The ACI did not receive compensation for creation this proposal.
### Next Steps
1. Publish a standard ARFC, collect community & service providers feedback before escalating proposal to ARFC snapshot stage.
2. If the ARFC snapshot outcome is YAE, publish an AIP vote for final confirmation and enforcement of the proposal.
### Copyright
Copyright and related rights waived via [CC0](https://creativecommons.org/publicdomain/zero/1.0/).
---
### Author:  [@LlamaRisk](https://governance.aave.com/u/LlamaRisk)
#### Post date: [April 15, 2025, 2:20pm UTC](https://governance.aave.com/t/arfc-onboarding-weth-to-aave-v3-celo-instance/21750/2 "2025-04-15T14:20:14Z")
## Summary
LlamaRisk recommends onboarding WETH to the Aave V3 Celo instance. While we acknowledge the asset’s limited liquidity, on-chain supply, and price history, these limitations are primarily due to Celo’s recent migration to an OP stack L2 (March 2025). The concentrated token distribution, with 85% held by just two accounts (primarily in Velodrome liquidity pools), reflects this recent deployment rather than fundamental concerns. From a technical perspective, WETH benefits from leveraging the extensively audited OP Stack infrastructure, which is protected by a robust $2 million bug bounty program providing additional security assurances. As a well-established asset, WETH’s introduction to the Aave Celo instance should attract significant liquidity, with the native bridged implementation expected to follow growth patterns similar to the existing Wormhole bridge WETH ($4.5M).
> **Collateral Risk Assessment**
>
> ## 1. Asset Fundamental Characteristics
>
> ### 1.1 Asset
>
> Wrapped ETH represents the ERC20 version of Ether. Tokenization solves the interoperability issue that limits ETH’s use in dApps and trade with other ERC20 tokens, given that it predates the ERC20 standard implementation.
>
> ### 1.2 Architecture
>
> WETH represents a 1:1 peg with ETH, the canonical smart [contract](https://etherscan.io/address/0xc02aaa39b223fe8d0a0e5c4f27ead9083c756cc2#readContract) responsible for issuing WETH swaps ETH for an equivalent amount of WETH. Inversely, Wrapped ETH can be unwrapped in exchange for its underlying ETH amount.
>
> ### 1.3 Tokenomics
>
> The primary functions for issuing WETH are `deposit` and `withdraw`. Total supply varies with the amount of ETH deposited. WETH on Celo is bridged natively using Standard Bridge, the bridging system for OP Stack chains. Users can access [Superbridge](https://github.com/superbridgeapp/superbridge-app), the frontend interface to bridge ETH from L1 to L2.
>
> For context, Celo recently migrated from L1 to L2 (as of March 26th, 2025) using the OP stack. WETH is minted from L1 deposits, initiated by `depositTransaction` calls via the OptimismPortal contract on Mainnet. Thereafter, L2 nodes listen for TransactionDeposited events to mint on Celo.
>
> #### 1.3.1 Token Holder Concentration
>
> 
>
> | Description | Value |
> | --- | --- |
> | Total Holders | 49 |
> | Total WETH Supply | 999.99 |
> | Top 10 Address Holdings | 99.88% |
> | Largest Holder | [CLPool](https://celoscan.io/address/0xa6a14e6767c07ffba3786ac0054a8647cfdca58d) (58.47%) |
>
> _Source: [Celoscan](https://celoscan.io/token/tokenholderchart/0xd221812de1bd094f35587ee8e174b07b6167d9af?range=10), April 10th, 2025_
>
> 85% of WETH is concentrated in 2 accounts, with the largest holder being a Velodrome liquidity pool (58%) and the second a [2/6 Multisig](https://celoscan.io/address/0x470787a48c0325d7ccefd6207fa32128c6d4f1ef) (32%). The third, fourth, and fifth largest are an unverified [contract](https://celoscan.io/address/0xcb6bc13a9df48f3dc5595d3121d441f6bb59b940#code) (~5%), [WETH/CELO](https://celoscan.io/address/0x0d76866f78fcbca2730e60c5997d59d6ba585613) Uniswap pool (~3%), and [USDT/WETH](https://celoscan.io/address/0xf55791afbb35ad42984f18d6fe3e1ff73d81900c#code) Uniswap pool (~2%). While most WETH is in a liquidity pool with multiple LPs, the asset’s narrow distribution across accounts could be explained by the contract’s recent launch (March 26th, 2025).
>
> ## 2. Market Risk
>
> ### 2.1 Liquidity
>
> 
> _Source: [Velodrome Finance](https://velodrome.finance/swap?from=0xd221812de1bd094f35587ee8e174b07b6167d9af&to=0x48065fbbe25f71c9282ddf5e1cd6d6a887483d5e&chain0=42220&chain1=42220), April 14th, 2025_
>
> Relative to the available supply onchain (\>1000 WETH), DEX liquidity is only available for ~56 WETH ($92K) within a 5% price impact.
>
> #### 2.1.1 Liquidity Venue Concentration
>
> 
>
> _Source: Coingecko, April 12th, 2025_
>
> According to [Coingecko](https://www.coingecko.com/en/coins/celo-bridged-WETH-celo#:~:text=What%20is%20the%20daily%20trading,list%20of%20highest%20volume%20cryptocurrencies.), only 2 liquidity sources are available for WETH: Uniswap and Velodrome.
>
> #### 2.1.2 DEX LP Concentration
>
> | Exchange | Pool | TVL | 24h Volume |
> | --- | --- | --- | --- |
> | Uniswap V3 | [USDT/WETH](https://www.geckoterminal.com/celo/pools/0xf55791afbb35ad42984f18d6fe3e1ff73d81900c) | $86.94K | $133K |
> | Uniswap V3 | [WETH/CELO](https://app.uniswap.org/explore/pools/celo/0x0d76866F78FcBCa2730E60C5997d59d6ba585613) | $124K | $10.6K |
> | Velodrome | [USDT/WETH](https://velodrome.finance/pools?token0=0x48065fbBE25f71C9282ddf5e1cD6D6A887483D5e&token1=0xD221812de1BD094f35587EE8E174B07B6167D9Af&type=100&factory=0x04625B046C69577EfC40e6c0Bb83CDBAfab5a55F&chain=42220) | $925K | $850K |
>
> The Velodrome USDT/WETH pool currency has 19 liquidity providers (addresses holding [VELO-CL-POS](https://celoscan.io/token/0x991d5546C4B442B4c5fdc4c8B8b8d131DEB24702#balances)), with 1 address providing 66% of the pool’s liquidity.
>
> Observing Uniswap liquidity provision events (add/remove) for WETH/CELO and USDT/WETH, no results were found post the contract creation, possibly indicating a single liquidity provider in each pair.
>
> ### 2.2 Volatility
>
> 
>
> _Source: [Geckoterminal](https://www.geckoterminal.com/celo/pools/0xa6a14e6767c07ffba3786ac0054a8647cfdca58d), April 14th, 2025_
>
> Given L2 WETH’s short history, the available data is too small to infer the asset’s volatility.
>
> ### 2.3 Exchanges
>
> No CEX currently supports Celo WETH.
>
> ### 2.4 Growth
>
> 
>
> _Source: [L2Beat](https://l2beat.com/scaling/projects/celo/tvs-breakdown), TVS Breakdown, April 14th, 2025_
>
> Early growth has been positive since the contract was deployed, accounting for approximately $1.5M (1K WETH).
>
> ## 3. Technological Risk
>
> Celo’s transition from an EVM-compatible L1 to an OP stack layer 2 introduces significant technical changes, which are summarized below.
>
> ### 3.1 Smart Contract Risk
>
> Since the Standard Bridge and `OptimismMintableERC20` facilitate the minting of WETH and form part of a wider OP stack codebase, risk assessments fall under OP stack audits. Multiple [audits](https://docs.optimism.io/stack/security/audits-report) have been completed on OP stack code, with 6 audits related to Bedrock (the current OP stack version) to date.
>
> ### 3.2 Bug Bounty Program
>
> An Optimism [bug bounty](https://immunefi.com/bug-bounty/optimism/information/#top) program worth $2m provides security incentives for the general codebase, which includes the `OptimismMintableERC20Factory` [contract](https://etherscan.io/address/0x0B3004b843dA84FE5D4C46AeB5E80F826e5CD69A#code) that generates `OptimismMintableERC20` contracts on the network it is deployed to, `L1StandardBridge`, and `L1CrossDomainMessenger`.
>
> ### 3.3 Price Feed Risk
>
> WETH is pegged 1:1 to ETH based on a collateralization pricing mechanism. The `REMOTE_TOKEN` address points to the L1 WETH contract on the Ethereum mainnet. The price is maintained at L1 WETH through:
>
> - Minting/Burning: Only the `BRIDGE` (StandardBridge) can mint/burn tokens (via `mint` and `burn`), ensuring supply matches locked L1 WETH.
> - Collateral: L1 WETH is locked in the L1 bridge contract when users deposit and unlocked when withdrawn.
>
> Potential intrinsic pricing risk if the L1 WETH contract is exploited, affecting the price of L2 WETH.
>
> An [ETH/USD](https://data.chain.link/feeds/celo/mainnet/eth-usd) Chainlink price feed is available on Celo, which has a 0.1% deviation threshold and 24-hour heartbeat.
>
> ### 3.4 Dependency Risk
>
> Native bridged WETH utilizes Standard Bridge to bridge L1 WETH to Celo. The Standard Bridge comprises 2 contracts, `L1StandardBridge` on Ethereum and `L2StandardBridge` on Celo. `CrossDomainMessenger` is used to communicate deposits and withdrawals between the chains.
>
> WETH relies on the [L1StandardBridge](https://etherscan.io/address/0x9C4955b92F34148dbcfDCD82e9c9eCe5CF2badfe#code) contract to escrow L1 ETH and the [L2StandardBridge](https://celoscan.io/address/0x4200000000000000000000000000000000000010) to mint WETH on Celo.
>
> ## 4. Counterparty Risk
>
> ### 4.1 Governance and Regulatory Risk
>
> ### 4.2 Access Control Risk
>
> `OptimismMintableERC20` [contract](https://celoscan.io/token/0xd221812de1bd094f35587ee8e174b07b6167d9af#readContract) is a representation of a token on an L2 from mainnet. It allows [Standard Bridge](https://docs.optimism.io/app-developers/bridging/standard-bridge) to mint and burn tokens.
>
> The Standard Bridge contract can:
>
> - Mint tokens when assets are deposited from L1 to L2.
> - Burn tokens when assets are withdrawn back to L1.
>
> The `BRIDGE` role is set at deployment by the `OptimismMintableERC20Factory` and is the only address with mint/burn privileges.
>
> [Proxy Admin](https://etherscan.io/address/0x783A434532Ee94667979213af1711505E8bFE374#readContract) is the owned by [2/2 Nested Multisig](https://etherscan.io/address/0x4092A77bAF58fef0309452cEaCb09221e556E112#readProxyContract).
>
> Here are the controlling wallets:
>
> - [Multisig A](https://etherscan.io/address/0x9Eb44Da23433b5cAA1c87e35594D15FcEb08D34d): 6/8 threshold
> - [Multisig B](https://etherscan.io/address/0x9Eb44Da23433b5cAA1c87e35594D15FcEb08D34d): 6/8 threshold.
>
> These multisigs are controlled by cLabs and the Celo Community Security Council. Proxy Admin control over the bridging contract is evenly distributed between the Celo development team and Community members.
>
> #### 4.2.1 Contract Modification Options
>
> The contract has no proxy pattern (non-upgradeable).
>
> #### 4.2.2 Timelock Duration and Function
>
> No timelocks are present.
>
> #### 4.2.3 Multisig Threshold / Signer identity
>
> As stated in section 3.4. The Proxy Admin contact is managed by 2 nested multisigs, one owned by the cLabs team and the other by Celo community members.
>
> The most [recent update](https://forum.celo.org/t/proposing-celo-l2s-security-council/10578) on Celo Community Security Council members consists of:
>
> L2Beat
> Hyperlane
> Valora
> Mento
> Nitya Subramanian
> Kris Kaczor
> Tim Moreton
> Aaron Boyd
>
> Below is a list of addresses for each of the signers in no particular order:
>
> 0x148dfac5df51ab1d7b02a3b53f1e2da1f0a6b5ca
> 0xD1C635987B6Aa287361d08C6461491Fa9df087f2
> 0x2be5e223e368e8c0f404a1f3eb4eb09f99c8fad8
> 0x6fdb3ea186981aa32dd8e7b782d95733ca3c13a1
> 0x5f70938aa8d2fd91ee3959998e5ddaacfb6ffb85
> 0xd0cE4D055d04bDA69b20815A3F796019bB68c6Db
> 0xb963047c5d875b7fe777339b1e6b61ac4df1f3e2
> 0xc3E966E79eF1aA4751221F55fB8A36589C24C0cA
>
> **Note** : This assessment follows the LLR-Aave Framework, a comprehensive methodology for asset onboarding and parameterization in Aave V3. This framework is continuously updated and [available here](https://github.com/llama-risk/aave-research/blob/main/frameworks/aave_v3_framework.md).
## Aave V3 Specific Parameters
Final parameters will be presented jointly with @ChaosLabs.
## Price feed Recommendation
We recommend using the Chainlink [ETH/USD](https://data.chain.link/feeds/celo/mainnet/eth-usd) price feed.
### 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.
---
### Author:  [@ChaosLabs](https://governance.aave.com/u/ChaosLabs)
#### Post date: [April 15, 2025, 6:47pm UTC](https://governance.aave.com/t/arfc-onboarding-weth-to-aave-v3-celo-instance/21750/3 "2025-04-15T18:47:40Z")
## Overview
Chaos Labs supports listing WETH on Aave V3’s Celo instance. Below is our analysis and initial risk parameter recommendations.
## WETH
WETH is one of the cornerstone assets of Aave V3, serving as a highly trusted collateral and debt asset. Over $4.75B of WETH was deposited on Aave V3, and $4.18B of it is being borrowed.
The token proposed for listing is Celo native bridge WETH, thus carrying a lower bridge risk. The native bridge is based on OP Stack’s Standard Bridge, which allows users to send WETH from to Celo. We note that Wormhole WETH is currently the most common ETH-related asset on Celo; the largest Uniswap pool by TVL is Wormhole WETH/CELO.
## Market Cap & Liquidity on Celo
Native WETH recently went live on Celo, quickly reaching an on-chain supply of 1K.
55% of the total supply is deposited in a Velodrome pool with USDT. However, the pool has become heavily imbalanced, leaving little liquidity for users to swap out of WETH. It has another pool with CELO on Uniswap, though its TVL is relatively small.
We expect that liquidity will improve following the asset’s listing on Aave and as users migrate away from bridged versions.
## **LTV, Liquidation Threshold, and Liquidation Bonus**
While WETH remains a very safe asset, which would suggest aligning its collateral parameters with those on other deployments, because of the very limited liquidity of the asset we recommend more conservative initial listing parameters. Specifically, we recommend an LTV of 78%, LT of 80% and a Liquidation Penalty of 7.5%.
## Supply Cap and Borrow Cap
Reflecting our evaluation of available liquidity and to support protocol safety and market responsiveness we recommend setting the initial supply cap to 500 WETH. In the event that supply on the chain grows quickly, we are prepared to facilitate large cap increases.
We recommend setting the asset’s borrow cap at 90% of its supply cap.
## Interest Rate Curve
We recommend aligning WETH’s IR curve with its curve on other Aave V3 instances, specifically setting Slope1 to 2.7%, Slope2 to 80%, and UOptimal to 90%.
## Oracle/Pricing
We recommend using the ETH/USD Chainlink [feed](https://data.chain.link/feeds/celo/mainnet/eth-usd) available on Celo.
## Specification
Following the above analysis, we recommend the following parameter settings:
| **Parameter** | **Value** |
| --- | --- |
| Asset | WETH |
| Isolation Mode | No |
| Borrowable | Yes |
| Collateral Enabled | Yes |
| Supply Cap | 500 |
| Borrow Cap | 450 |
| Debt Ceiling | - |
| LTV | 78.00% |
| LT | 80.00% |
| Liquidation Penalty | 7.50% |
| Liquidation Protocol Fee | 10.00% |
| Variable Base | 0.0% |
| Variable Slope1 | 2.7% |
| Variable Slope2 | 80.00% |
| Uoptimal | 90% |
| Reserve Factor | 15% |
| Stable Borrowing | Disable |
| Flashloanable | Enabled |
| Siloed Borrowing | Disabled |
| Borrowable in Isolation | Disabled |
| E-Mode Category | N/A |
# **Disclaimer**
Chaos Labs has not been compensated by any third party for publishing this ARFC.
# **Copyright**
Copyright and related rights waived via [CC0](https://creativecommons.org/publicdomain)
---
### Author:  [@ACI](https://governance.aave.com/u/ACI)
#### Post date: [May 7, 2025, 11:42am UTC](https://governance.aave.com/t/arfc-onboarding-weth-to-aave-v3-celo-instance/21750/4 "2025-05-07T11:42:31Z")
The current proposal has been escalated to [ARFC Snapshot](https://snapshot.box/#/s:aavedao.eth/proposal/0xcf4e56350b6dc4615f4206a02d41c8f5958bc9a71594bed975e2657c9bc0b9b8) after discussing with BDG.
Vote will start tomorrow, we encourage everyone to participate.
---
### Author:  [@system](https://governance.aave.com/u/system)
#### Post date: [June 6, 2025, 11:43am UTC](https://governance.aave.com/t/arfc-onboarding-weth-to-aave-v3-celo-instance/21750/5 "2025-06-06T11:43:10Z")
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