[Direct to AIP] Add USDe to the sUSDe emode Category

Governance
3

Summary

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:

  1. 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.

  2. 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.

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