[Direct to AIP] Onboard USDe to Aave V4 Core Instance on Avalanche

Governance New Asset
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Title: [Direct to AIP] Onboard USDe to Aave V4 Core Instance on Avalanche
Author: @AaveLabs
Date: 2026-09-01

Summary

This proposal seeks to onboard USDe to the Aave V4 Core Instance on Avalanche. This proposal follows the Direct to AIP route.

Motivation

USDe is Ethena Labs’ synthetic dollar, targeting a value of one US dollar through a strategy that pairs staked collateral with offsetting perpetual futures positions, held largely offchain. Ethena Labs has extended USDe and its staked form to Avalanche, with support from spot and lending venues across the network.

Onboarding USDe would:

  • Add a synthetic dollar stablecoin to the Aave V4 Core Instance on Avalanche.
  • Support demand emerging from Ethena’s expansion of USDe to Avalanche.
  • Extend USDe’s collateral footprint within the broader Aave protocol, where it is already listed across other Aave instances.

Specification

This proposal onboards USDe to the Aave V4 Core Instance on Avalanche.

Risk parameters and final configuration will be provided by the Risk Service Providers and this proposal will be updated accordingly.

Useful Links

Disclaimer

This proposal was prepared by Aave Labs in its capacity as a contributor to the Aave ecosystem. Aave Labs has no direct financial relationship with Ethena Labs or its affiliates and has not received compensation from Ethena Labs or its affiliates in connection with this proposal.

Next Steps

  1. Gather community and Service Provider feedback.
  2. Incorporate the Risk Service Providers’ final configuration for the Aave V4 Core Instance on Avalanche.
  3. Publish the AIP vote for final confirmation and onchain enforcement of the proposal.

Copyright

Copyright and related rights waived via CC0.

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Summary

LlamaRisk supports onboarding USDe to the Aave V4 Core Hub on Avalanche. USDe is already listed on multiple Aave markets, including V3 and V4. Native USDe minting is not available on Avalanche, and USDe is instead bridged using LayerZero’s Omnichain Fungible Token (OFT) standard, with backing escrowed on Ethereum. The USDe OFT mesh currently spans 31 networks.

On the access control side, the USDe OFT on Avalanche is controlled by a custom timelock controller with a 24-hour delay, which maintains a whitelist allowing certain functions to bypass the delay. Currently, setPeer is whitelisted for the Ethena 5/10 multisig, allowing it to add or remove peers from the OFT mesh without a delay. While this can serve as a plausible incident response mechanism, it could also be exploited by an attacker-controlled address on a chain where the OFT has been compromised. A separate pauser mechanism for incident response currently doesn’t exist. Timelock coverage is absent on some prominent networks in the mesh, with Ethena working to extend coverage over the next few weeks.

USDe DEX liquidity on Avalanche is concentrated in a single Uniswap V3 USDe/USDC pool with approximately $0.5M in TVL, which is relatively low for initial liquidity. Thus, we’re proposing conservative initial caps. Given recent changes to the USDe IRM, particularly the base rate increase, borrowing USDe at current rates is unattractive. We therefore recommend onboarding USDe as a collateral-only reserve on Avalanche, with borrowing disabled.

The full assessment can be found in its corresponding thread.

Aave V4 Specific Parameters

We recommend creating a new Ethena Ecosystem Spoke on V4 Avalanche to onboard USDe as a collateral-only reserve.

Dynamic Liquidation Bonus Configuration

Chain Hub Spoke Liquidation Bonus Factor Target Health Factor Health Factor For Max Bonus
Avalanche Core Ethena Ecosystem 100.00% 1.0277 0.99

Spoke Parameters

Chain Hub Spoke Reserve Collateral Factor Max Liquidation Bonus Borrowable Collateral Risk Liquidation Fee Risk Premium Threshold Receive Shares
Avalanche Core Ethena Ecosystem USDe 93.00% 2.00% FALSE 0 10.00% 0 TRUE
Avalanche Core Ethena Ecosystem USDT 0.00% - TRUE - - - TRUE
Avalanche Core Ethena Ecosystem USDC 0.00% - TRUE - - - TRUE

Add and Draw Caps

Chain Hub Spoke Reserve Add Cap Draw Cap
Avalanche Core Ethena Ecosystem USDe 5,000,000 0
Avalanche Core Ethena Ecosystem USDT 0 2,500,000
Avalanche Core Ethena Ecosystem USDC 0 2,500,000

Price feed Recommendation

We recommend to price USDe using the Capped USDT/USD feed, consistent with the approach adopted across all Aave instances for USDe-denominated assets.

Disclaimer

This review was independently prepared by LlamaRisk, a community-led decentralized organization funded in part by the Aave DAO. LlamaRisk serves as an independent attestor of Ethena’s PoR solution. 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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