[Direct to AIP] Onboard wBTC to Sonic V3 Instance

Governance New Asset
1

[Direct to AIP] Onboard wBTC to Sonic V3 Instance

Author: ACI

Date: 2025-06-09

Risk Parameters have been provided by Risk service providers and this proposal has been updated accordingly 2025-06-17

Summary

This proposal plans to onboard wBTC (Wrapped Bitcoin) to Aave V3 Sonic instance. The objective is to expand the range of assets supported on Sonic with a battle-tested, highly liquid, and widely adopted token that serves as a Bitcoin representation on Ethereum and other EVM-compatible chains.

This proposal is a Direct to AIP proposal since asset is already onboarded on many instances.

Motivation

The inclusion of wBTC on Aave V3 Sonic provides Aave users with access to the largest Bitcoin wrapper in DeFi.

wBTC is already deployed across multiple Aave instances, with high usage and established risk parameters.

Onboarding wBTC on Sonic aligns with Aave’s multi-chain growth strategy and enables users to leverage BTC liquidity in a high-throughput, low-latency environment.

Specification

Contract addresses:

wBTC on Sonic: 0x0555E30da8f98308EdB960aa94C0Db47230d2B9c

https://sonicscan.org/token/0x0555e30da8f98308edb960aa94c0db47230d2b9c

Risk Parameters:

Risk Parameters have been provided by Risk service providers and this proposal has been updated accordingly 2025-06-17

Parameter Value
Chain Sonic
Isolation Mode No
Borrowable Yes
Collateral Enabled Yes
Supply Cap 50
Borrow Cap 5
Debt Ceiling -
LTV 73.00%
LT 78.00%
Liquidation Bonus 7.50%
Liquidation Protocol Fee 10.00%
Variable Base 0.0%
Variable Slope1 4.00%
Variable Slope2 60.00%
Uoptimal 45.00%
Reserve Factor 50.00%
Stable Borrowing Disabled
Flashloanable Yes
Siloed Borrowing No
Borrowable in Isolation No

Disclaimer

ACI is not directly affiliated with the issuers of the assets mentioned in this proposal and did not receive compensation for creating this proposal.

Next Step

  1. Publish a Direct to AIP proposal, collect community & service provider feedback.
  2. Publish an AIP vote for final confirmation and enforcement of the proposal.

Copyright

Copyright and related rights waived under CC0.

2

Hello,

With only 46 BTC currently available on Sonic which is roughly a market cap of 5m I do not think it makes sense to list this asset from an economical perspective for the DAO.

3

This is a chicken and egg relations. Without AAVE’s support, the BTC in sonic shall have much less utilities as an assets. This is a meaningful step to support Sonic’s growth and revenue for AAVE.

4

It might be. But listing assets is costing resources. Is it worth using these for an asset that may only bring 500k a year (very optimistic target)?
I would rather see it grow and then list it.
The Aave DAO is not anymore at a point where it needs to list everything coming across. It’s about optimizing and making real profits.

5

Summary

LlamaRisk recommends onboarding WBTC to Sonic. While @Ezreal raises a valid point about limited total supply on this network, the familiar nature of the asset and the bridging technology (LayerZero) result in limited onboarding friction - as indicated by this proposal’s Direct-to-AIP nature.

LlamaRisk also would like to highlight the potential for an “Aave effect” on this asset, where the onboarding of an asset to the protocol on a new network results in market capitalization growth for said asset. By onboarding this nascent asset, Aave stands a chance at becoming a network-leader for a strategically important asset that has clear PMF on many networks.

The main value proposition of onboarding this asset is to either long or short WBTC as (re)staked bitcoin is not yet a developed sector on this network. Leveraged staking trades are therefore not yet possible on Sonic, resulting in the main use cases being either increasing holder capital efficiency or enabling trading on the asset.

Architecture

WBTC on Sonic is an OFT, meaning it is bridged with LayerZero. 52 WBTC have been bridged thus far, giving it a $5.6M onchain market capitalization. OFTs are widely used on Aave at this time, so little incremental architectural risk is presented by the asset or its used bridging solution.

image
image2356Ă—828 151 KB

Source: WBTC Holders, SonicScan, June 10, 2025

The contract was deployed in February 2025. This asset class presents very limited risk as a direct token wrapper. The asset is distributed >50% into three addresses: a Shadow DEX pool, a second Shadow DEX pool, and a SwapX pool. This presents limited risk given these are DEX pools with moderately (first 75% held in 8 addresses) distributed depositors.

Market Outlook

image
image1920Ă—957 99.2 KB

Source: WBTC to S, Odos Router, June 9th, 2025

Liquidity for this asset is limited in a real sense but highly distributed amongst DEX pools. Most liquidity is held in Shadow WBTC/USDC.e and WBTC/WETH pools. 30 WBTC may be swapped at ±7.5% price impact. Given the nascent nature of this asset on the network, DEX TVL may become more concentrated into a few larger pools that generate additional fees from volume.

This market may grow significantly, reflecting the examples of Arbitrum ($332M) and Optimism ($41M). Other BTC-linked assets on L2s frequently reach similarly large TVLs, such as BTC.b ($355M) on Avalanche or cbBTC ($274M) on Base. It could represent a major portion of the Sonic market, which currently stands at $350M supply.

Market risk is, therefore, reasonable, but this can be reasonably mitigated through cautious parameterization.

Ownership

WBTC on Sonic is owned by a 2/3 Safe with signers:

This safe may:

  • Modify a variety of OFT settings, including transfer fees and message inspectors
  • Change ownership or renounce it altogether

These parameters are in the hands of a 2/3 Safe present counterparty risk.

Price feed

This asset may be priced through a network-specific WBTC Chainlink feed. The Arbitrum market, by contrast, uses a BTC/USD feed and so too does the Optimism market.

Parameter recommendations

Presented jointly with @ChaosLabs

Disclaimer

This review was independently prepared by LlamaRisk, a community-led decentralized organization funded in part by the Aave DAO. LlamaRisk is not directly affiliated with the protocol(s) reviewed in this assessment and did not receive any 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.

6

Overview

Chaos Labs supports listing WBTC on Aave V3’s Sonic instance. Below is our analysis and risk parameter recommendations for the initial listing.

WBTC

WBTC on Sonic uses a LayerZero OFT contract, as is the case on Arbitrum, presenting limited new technical risk, though the contract is owned by a 2-of-3 multisig. The asset’s popularity and use of a common bridging standard increases the likelihood that cross-chain arbitrageurs will cover the asset and ensures quick mean reversion during depegs.

Usage on Aave

On Ethereum Core, WBTC’s largest market, WBTC is largely used as a collateral asset, with the vast majority being used to borrow stablecoins.

image (7)
image (7)1854Ă—624 77.8 KB

There is relatively limited and inconsistent borrow demand for the asset, though the most common collateral asset is wstETH. LBTC has recently become more popular as a collateral asset against WBTC, facilitated by an FBTC/WBTC E-Mode.

Market Cap and Liquidity

WBTC has displayed a consistent upwards trend in its supply on Sonic, indicating that its listing on Aave may spark further adoption.

output (75)
output (75)1779Ă—1371 141 KB

Its on-chain DEX liquidity has also been improving, with a variety of pools where the asset is paired primarily with WETH and USDC; this provides a strong foundation with which to list the asset on Aave.

output (76)
output (76)1779Ă—1372 149 KB

LTV, LT, and Liquidation Bonus

Given that WBTC has long been deployed on other instances with no problems related to its collateral parameters, we recommend aligning WBTC on Sonic with WBTC on Optimism, providing a slightly higher Liquidation Bonus than on other instances to account for its lower supply.

Supply Cap and Borrow Cap

Taking into account WBTC’s status as a trusted asset on Aave, as well as the anticipated increase in its activity on Sonic following listing, we recommend setting its initial supply cap to 50 WBTC. Given the lack of demand for borrowing BTC-linked assets (against anything except yield-bearing or points-bearing BTC assets, which are not currently listed on Sonic), we recommend setting the borrow cap to 10% of the supply cap.

IR Curve Parameters

We recommend aligning the interest rate parameters with those of WBTC on other Layer 2 networks to ensure consistency across similar assets on Aave V3.

Price Oracle

We recommend utilizing the WBTC/USD Chainlink price feed for this asset.

Recommendations

Following the above analysis, we recommend listing WBTC on Sonic with the below parameter settings:

Parameter Value
Chain Sonic
Isolation Mode No
Borrowable Yes
Collateral Enabled Yes
Supply Cap 50
Borrow Cap 5
Debt Ceiling -
LTV 73.00%
LT 78.00%
Liquidation Bonus 7.50%
Liquidation Protocol Fee 10.00%
Variable Base 0.0%
Variable Slope1 4.00%
Variable Slope2 60.00%
Uoptimal 45.00%
Reserve Factor 50.00%
Stable Borrowing Disabled
Flashloanable Yes
Siloed Borrowing No
Borrowable in Isolation No

Disclaimer

Chaos Labs has not been compensated by any third party for publishing this recommendation.

Copyright

Copyright and related rights waived via CC0

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