Changelog: October 19, 2026
Updated USDe collateral risk parameters and the stablecoin interest rate curves to support the planned incentivized market setup.
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 | 16.50% | 10.00% | 0 | TRUE |
| Avalanche | Core | Ethena Ecosystem | USDT | 0.00% | - | TRUE | - | - | 1100% | TRUE |
| Avalanche | Core | Ethena Ecosystem | USDC | 0.00% | - | TRUE | - | - | 1100% | TRUE |
Add and Draw Caps
| Chain | Hub | Spoke | Reserve | Add Cap | Draw Cap |
|---|---|---|---|---|---|
| Avalanche | Core | Ethena Ecosystem | USDe | 60,000,000 | 0 |
| Avalanche | Core | Ethena Ecosystem | USDT | 0 | 50,000,000 |
| Avalanche | Core | Ethena Ecosystem | USDC | 0 | 3,000,000 |
We recommend adjusting the caps on the existing USDT reserve on Main Spoke as follows:
| Chain | Hub | Spoke | Reserve | Current Add Cap | Recommended Add Cap |
|---|---|---|---|---|---|
| Avalanche | Core | Main | USDT | 20,000,000 | 60,000,000 |
Interest Rate Strategy
| Hub | Reserve | Current Rate Growth Before Optimal | Recommended Rate Growth Before Optimal | Current Rate Growth After Optimal | Recommended Rate Growth After Optimal | Current Optimal Usage Ratio | Recommended Optimal Usage Ratio |
|---|---|---|---|---|---|---|---|
| Avalanche Core | USDT | 4.00% | 4.90% | 10.00% | 20.00% | 90.00% | 94.00% |
| Avalanche Core | USDC | 4.00% | 4.50% | 10.00% | 20.00% | 90.00% | - |
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.