Overview
Chaos Labs supports the listing of USDe & sUSDe on the Aave V3 Avalanche instance. Both assets have a proven track record on Ethereum, demonstrating strong user demand. Below, we present our analysis of USDe and sUSDe along with initial risk parameter recommendations.
Cross Chain Infrastructure
USDe and sUSDe bridge between Ethereum and Avalanche via LayerZero using two contracts: an adapter on Ethereum that escrows the canonical tokens and an OFT on Avalanche that mints and burns. For Ethereum to Avalanche, users approve the adapter and call send; the adapter locks the tokens, emits a LayerZero message, and the Avalanche OFT mints the same amount to the recipient’s address. By default, there are no bridge haircuts, as the amount sent equals the amount received after dust rounding. Neither USDe nor sUSDe can be minted natively on Avalanche, since their Avalanche contracts mint only when a LayerZero message confirms tokens have been locked on Ethereum, making them purely bridged representations.
Because sUSDe on Avalanche is a bridged representation and does not run vault logic, its exchange rate is not carried across by the bridge itself. Instead, the rate is enforced through arbitrage to the Ethereum DEX counterparts.
Market Cap & Liquidity
USDe and sUSDe were both launched on Avalanche in early August 2025 and experienced sharp increases in supply toward the end of the month. For USDe, the surge was driven by a single bridge of 2.5M on August 28. For sUSDe, supply growth was driven by three bridge transactions: two totaling approximately 840K on August 21 and another bridge of 2.1M on August 28. All these transactions were initiated by the same address. After bridging the funds, the user immediately deposited the tokens into the USDe/USDt and sUSDe/USDt Uniswap liquidity pools.
Currently, all USDe liquidity is concentrated in the USDe/USDt Uniswap Liquidity Pool, which has maintained a stable TVL of $5M since its launch on August 28.
For sUSDe, its liquidity is primarily concentrated in the sUSDe/USDt Uniswap Liquidity Pool with a TVL of $5M, the sUSDe/USDC LFJ Liquidity Pool with a TVL of $3.58M, the sUSDe/USDC Pharaoh Liquidity Pool with a TVL of $452.19K, the sUSDe/USDt Pharaoh Liquidity Pool with a TVL of $414.52K. Below, we present aggregated sUSDe liquidity over the past 20 days, which has trended steadily upward.
Volatility
To further evaluate whether the USDe and sUSDe liquidity pools on Avalanche are effective, which means assessing their ability to support stable trading by keeping prices closely aligned with benchmarks, we fetched the effective prices of both assets in their respective Avalanche pools and compared them against their effective prices in the Ethereum liquidity pools, which serve as benchmarks given that Ethereum DEX pools have the largest volume or scale.
USDe
We compare the effective trading price of USDe in the USDe/USDt Uniswap liquidity pool on Avalanche with that in the USDe/USDT pool on Ethereum. As shown in the figure below, the effective price of USDe in the Avalanche pool has remained stably pegged to $1 and, for most of the time, closely tracked the effective price observed in the Ethereum pool. However, we also believe this outcome is partly the result of the relatively short operating history of the USDe/USDt pool on Avalanche and the limited number of observed transactions, which reduces the likelihood of price dislocations.
Although historical data is limited, the available evidence shows that USDe has maintained strong peg stability in the liquidity pool on Avalanche. Accordingly, we assess that the risk of market inefficiency is limited. Chaos Labs will continue to monitor the USDe Avalanche liquidity pool to ensure it remains effective over time.
sUSDe
Next, we present the effective price of sUSDe in the sUSDe/USDt Uniswap Liquidity Pool on Avalanche alongside that in the sUSDe/USDT Uniswap Liquidity Pool on Ethereum. As shown in the chart, the effective price of sUSDe in the Avalanche pool has maintained a stable peg with its effective price in the Ethereum pool over the past two weeks, with the largest dislocation limited to 5 bps. This indicates that the sUSDe/USDt Uniswap pool on Avalanche is functioning efficiently, as arbitrage activity has been sufficient to eliminate small gaps and maintain the peg.
At the same time, we observe a pattern similar to that of the USDe market. Due to its similarly limited operating history, trading volume in the Avalanche pool remains relatively low at end of August. However, more granular data indicates that activity is gradually increasing, suggesting that market depth and trading capacity are steadily improving.
E-Mode
We recommend establishing a sUSDe Stablecoin E-Mode and a USDe Stablecoin E-Mode to facilitate looping behavior and enhance capital efficiency, with the goal of driving growth in the sUSDe & USDe market.
LTV, Liquidation Threshold, and Liquidation Bonus
From the perspective of market efficiency and relative liquidity, setting the same parameters for USDe and sUSDe as on Ethereum Mainnet would be reasonable. However, in order to account for possible price deviation between the asset’s value and the Avalanche DEX prices, given that both assets have only been onboarded on Avalanche for about a month and their liquidity data has yet to establish a solid track record, we recommend applying slightly more conservative risk parameters than those on Ethereum. Based on this, we suggest setting sUSDe and USDe at an LTV of 70%, an LT of 73%, and an LB of 8.5%.
Supply Cap and Borrow Cap
Given the scale and growth of USDe and sUSDe’s on-chain liquidity, along with the seamless cross-chain bridging enabled by LayerZero OFT, we believe a relatively high supply cap is justified. We therefore recommend setting the initial supply cap for both assets at 50M.
We also recommend setting the borrow cap of USDe in line with the Uoptimal threshold, slightly above to accommodate additional borrowing demand, specifically at 42.5M.
Interest Rate
We recommend aligning USDe’s interest rate parameters with those of other stablecoins on Avalanche. At the same time, we suggest setting a lower Uoptimal at 80% to account for USDe’s recent launch on Avalanche and its relatively limited supply.
Oracle/Pricing
We recommend pricing sUSDe using the sUSDe/USDe exchange rate oracle, combined with the CAPO adapter and further calibrated by the Risk Oracle, while using the USDT/USD Chainlink oracle to price USDe.
CAPO
sUSDe’s yield has shown a moderate level of volatility. Taking this into account, we recommend setting the Snapshot Delay at 14 days and the maxYearlyGrowthRatio at 15.19%.
Specification
USDe & sUSDe Market Configuration (Avalanche Instance)
| Parameter | Value | Value |
|---|---|---|
| Asset | USDe | sUSDe |
| Isolation Mode | No | No |
| Borrowable | Yes | No |
| Collateral Enabled | Yes | Yes |
| Supply Cap | 50,000,000 | 50,000,000 |
| Borrow Cap | 42,500,000 | - |
| Debt Ceiling | - | - |
| LTV | 70% | 70% |
| LT | 73% | 73% |
| Liquidation Bonus | 8.5% | 8.5% |
| Liquidation Protocol Fee | 10.00% | 10.00% |
| Variable Base | 0 | - |
| Variable Slope1 | 6.5% | - |
| Variable Slope2 | 50% | - |
| Uoptimal | 80% | - |
| Reserve Factor | 25% | - |
| Stable Borrowing | Disabled | Disabled |
| Flashloanable | No | No |
| Borrowable in Isolation | No | No |
| E-Mode Category | Stablecoin | Stablecoin |
USDe Stablecoin E-mode Configuration
| Parameter | Value | Value | Value | Value |
|---|---|---|---|---|
| Asset | USDe | USDt | GHO | USDC |
| Collateral | Yes | No | No | No |
| Borrowable | No | Yes | Yes | Yes |
| Max LTV | 89% | - | - | - |
| Liquidation Threshold | 92% | - | - | - |
| Liquidation Bonus | 2% | - | - | - |
sUSDe Stablecoin E-mode Configuration
| Parameter | Value | Value | Value | Value | Value |
|---|---|---|---|---|---|
| Asset | sUSDe | USDe | USDt | GHO | USDC |
| Collateral | Yes | No | No | No | No |
| Borrowable | No | Yes | Yes | Yes | Yes |
| Max LTV | 89% | 89% | - | - | - |
| Liquidation Threshold | 91% | 91% | - | - | - |
| Liquidation Bonus | 4% | 4% | - | - | - |
CAPO Parameters sUSDe
| Token | Snapshot Delay | maxYearlyGrowthRatio |
|---|---|---|
| sUSDe | 14 days | 15.19% |
Disclaimer
Chaos Labs has not been compensated by any third party for publishing this research. Our pre-launch risk reports on Ethena, published over a year ago, represented a temporary compensated engagement, bear no implications on the current state of the protocol and can be viewed here on our website. We additionally provide proof-of-reserve attestations for the Ethena Protocol, which periodically reflect the aggregate state of the portfolio relative to the underlying USDe shares emitted.
Copyright
Copyright and related rights waived via CC0