[Direct to AIP] Add USDe to the sUSDe emode Category
Author: ACI
Date: 2025-07-23
Motivation
Currently, the sUSDe (Ethena Synthetic USD) has its own e-mode category in Aave, allowing for optimized borrowing for this specific asset. However, USDe, the native stablecoin from Ethena, is not included in this same e-mode category despite being the underlying asset for sUSDe.
This proposal aims to add USDe as collateral to the existing sUSDe/Stablecoins emode category to improve capital efficiency and provide a more cohesive borrowing experience for users of Ethena assets on Aave.
Rationale
USDe and sUSDe are intrinsically linked, with sUSDe being the staked version of USDe
Both assets have similar risk profiles and high correlation
Adding USDe as collateral to the same e-mode category would allow users to add USDe exposure while maintaining their leverage.
This change would allow borrowers to use either asset as collateral more effectively
Technical Implementation
The change would involve adding USDe to the existing e-mode category where sUSDe is currently placed. The risk parameters, including LTV, liquidation threshold, and liquidation bonus parameters, should be reconsidered because of the staking time lag inherited in sUSDe and the inability to activating two different e-modes at same time on the same wallet.
Risk Considerations
Given that USDe and sUSDe share the same underlying risk profile and are directly convertible (albeit with potential unstaking periods), the risk of including both in the same e-mode category is minimal. Standard risk assessment procedures should be followed.
Disclaimer
ACI did not receive compensation for the creation of this proposal.
Next Steps
Publish proposal to gather community and Service Providers feedback.
Publish an AIP vote for final confirmation and enforcement of the proposal.
We support the proposal to add USDe as collateral to the existing sUSDe stablecoin e-mode category on Core. Given the intrinsic relationship between the two assets, this integration is both logical and beneficial. Including USDe would improve user flexibility without introducing additional risk.
Rationale
USDe and sUSDe are closely linked and share similar risk profiles, as both are native to the Ethena protocol and derive value from the same underlying mechanism. Including USDe as collateral within the e-mode offers advantages, particularly in terms of liquidity and operational flexibility. Unlike sUSDe, which requires a cooldown period for unstaking, USDe can be quickly redeemed by a whitelisted set of addresses within the Ethena ecosystem, making it more accessible and responsive in dynamic market conditions.
This improved liquidity arguably makes USDe the less risky of the two from both a liquidation and usability perspective. Its inclusion in the sUSDe e-mode would preserve the integrity of the current risk framework while improving available liquidity for liquidations.
Moreover, the Ethena ecosystem may introduce mechanisms to encourage more balanced participation between USDe and sUSDe on Aave. Enabling both assets within the same e-mode framework positions Aave to support such developments effectively, while offering users increased flexibility to engage with emerging opportunities across the protocol.
We do not recommend any changes to the existing risk parameters. The current configuration for sUSDe is sufficiently conservative to support the inclusion of USDe.
Recommendation
We recommend proceeding with the addition of USDe to the existing sUSDe e-mode category under the current risk parameters. The strong alignment between these assets, combined with the potential for improved liquidity and user experience, makes this a low risk, high reward adjustment.
Disclaimer
Chaos Labs has not been compensated by any third party for publishing this recommendation.
This proposal recommends adding USDe to the existing sUSDe E-Mode category. This change would allow users to utilize USDe and sUSDe as collateral under a single, unified E-Mode, enhancing capital efficiency and improving the user experience. Given that USDe is the underlying asset for sUSDe and possesses a slightly lower risk profile, we judge that its inclusion in the more conservative sUSDe E-Mode is a safe enhancement to Aave.
Rationale
Currently, Aave offers separate E-Mode categories for USDe and sUSDe. Because users can only activate one E-Mode at a time, they cannot efficiently use a mixed collateral position of both assets and benefit from the higher LTV that E-Mode offers. Adding USDe to the existing sUSDe E-Mode category would enable the following:
Improved Capital Efficiency: Users holding both USDe and sUSDe could combine them as collateral under the sUSDe E-Mode, maximizing their borrowing power without being restricted to a single asset type.
Enhanced User Experience: This integration simplifies the process for users wishing to unwind leveraged sUSDe positions. They could do so directly unstaking the sUSDe without first swapping sUSDe for USDe, reducing transaction costs and complexity. This improves the overall composability of Ethena assets on Aave.
Risk Considerations
USDe and sUSDe share a nearly identical risk profile, as both are deeply integrated within the Ethena protocol. The primary difference is that sUSDe carries slightly more risk due to the seven-day unstaking period required to redeem the underlying USDe.
This proposal suggests adding USDe, the more liquid and slightly safer asset, to the sUSDe E-Mode, which already operates with more conservative risk parameters. Therefore, no adjustments to the existing sUSDe E-Mode parameters are necessary to safely onboard USDe. The current configuration is sufficiently robust to accommodate both assets without introducing new risk.
Disclaimer
This review was independently prepared by LlamaRisk, a community-led decentralized organization funded in part by the Aave DAO. LlamaRisk serves as Ethena’s Risk Committee member and Ethena’s PoR attestor. LlamaRisk did not receive 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.