Summary
LlamaRisk supports onboarding USDG to the Aave V3 Arbitrum instance as a borrowable, non-collateral asset, with a 30M supply cap and a 27M borrow cap. About 2.95M USDG can be bought near par on Arbitrum today. USDG is already listed on Aave V3 Ethereum Core, Ink and X Layer. It is minted on Arbitrum by the same three Paxos supply controllers as on Ethereum, Ink and X Layer, with the same limits and the same mint destinations, plus the bridge wrapper.
Pause, freeze, and wipe stay instant so Paxos can halt an address. One Paxos address can change mint limits, peers, rate limits, DVNs, libraries, and the wrapper with no delay. We rate this as a medium risk. Token upgrades and role changes sit behind a 24-hour timelock.
1. Asset Fundamental Characteristics
1.1 Asset
USDG (Global Dollar) is a fiat-backed, non-yield-bearing US dollar stablecoin issued by Paxos Digital Singapore under MAS oversight and by Paxos Issuance Europe under MiCA. It is listed as borrowable and non-collateral on Aave V3 Ethereum Core (assessment), Ink and X Layer (assessment), and on Aave V4 Ethereum. Most USDG on Aave sits on V4: about 78.8M on the Ethereum Main spoke and 34.1M on the Maple syrupUSDG spoke, against about 6.5M across the three V3 instances.
1.2 Architecture
Mint and redemption
Only KYC-verified Paxos customers can mint and redeem, with settlement of up to T+5 business days, as on the other chains we have reviewed. Paxos mints to its operations wallet and then sends USDG to the customer’s registered address. The Arbitrum SupplyControl contract lists the same three Paxos supply controllers as Ethereum, Ink and X Layer, with the same capacities and permitted mint destinations, plus the bridge wrapper.
Source: SupplyControl configuration, 20 October 2026.
Since deployment, 47.30M has been minted outside the bridge and 1.55M burned outside it. Bridge flow is 27.44M in and 39.95M out, a net outflow of 12.51M. Those components reconcile to the 33.24M supply. Arbitrum’s bridge contract is an upgradeable wrapper. Ethereum, Ink, and X Layer use a non-upgradeable wrapper.
Supply on Arbitrum
The chain holds 33.24M USDG, 1.06% of the 3.13B total supply. Since 13 October, 12.5M was minted in three transactions, and 38.06M crossed the bridge, 14.55M in and 23.51M out.
Source: USDG mint and burn events, 20 February to 20 October 2026.
1.3 Backing and Reserve Analysis
USDG is fully reserved 1:1 in cash and short-dated US government securities. Reserves, custody and issuer structure were reviewed in our USDG backing asset review, and we found no change to the issuer entity, custody setup or reserve composition since. Paxos has published monthly attestations by KPMG LLP through August 2026.
1.4 Tokenomics and Holder Concentration
292 addresses hold USDG on Arbitrum, and the top 10 addresses hold 94.6%. GMX is eight pools.
| Holder |
USDG |
Share |
| GMX GM markets (eight pools) |
13.34M |
40.1% |
| SubsidyVault 0xf109…8638, owned by a 3-of-6 Safe |
7.55M |
22.7% |
| Morpho 0x6c24…8f5e |
4.06M |
12.2% |
| Fluid liquidity layer 0x52aa…e497 |
2.43M |
7.3% |
| Paxos operations wallet 0x264b…97b5 (EOA) |
2.24M |
6.8% |
| Uniswap v4 PoolManager |
1.28M |
3.8% |
| Safe 0xef29…e1f4 (3-of-6) |
1.12M |
3.4% |
Source: USDG totalSupply and Transfer replay, 20 October 2026.
2. Market Risk
2.1 Liquidity
Pools
USDG liquidity on Arbitrum sits in two pools. No other pool holds more than $0.1M.
| DEX |
Pool |
TVL |
Largest LP Share |
| Fluid |
USDG/USDC |
$5.03M |
Not attributable: deposits come in through Fluid vault 0x989a…f881, so the pool shows the vault as the LP |
| Uniswap v4 |
USDG/USDC |
$0.90M |
49.7% of active liquidity: one position owned by Safe 0x7c59…d311 (3-of-7) |
Source: GeckoTerminal, PositionManager and StateView, 20 October 2026.
The Uniswap v4 pool uses Uniswap’s upgradeable dynamic-fee hook (StablePairHook), listed in its v4-hooks-public repository. Upgrades and fee changes sit with the Uniswap Governance Timelock, acting on Arbitrum through its bridge alias.
Buying USDG
Because USDG would be borrow-only, buying depth matters most. A flash-loan liquidation has to buy USDG on Arbitrum in the same transaction. A borrower, or a liquidator using their own USDG, can buy on Ethereum and bridge first. The bridge cannot deliver the USDG inside the liquidation call.
| Buy USDG with USDC |
Output (USDG) |
Price impact |
| 1,000,000 |
999,482 |
0.05% |
| 2,000,000 |
1,998,139 |
0.09% |
| 2,900,000 |
2,895,920 |
0.14% |
| 3,000,000 |
2,945,769 |
1.81% |
| 3,200,000 |
2,945,769 |
7.94% |
| 5,000,000 |
2,945,769 |
41.08% |
Source: Fluid USDG/USDC and the Uniswap v4 quoter, best split, impact against par, 20 October 2026.
About 2.95M USDG can be bought near par on Arbitrum: 2.40M from Fluid and 0.55M from Uniswap v4. Beyond that, neither pool can fill, and additional USDC buys nothing.
On 22 October, the Curve USDG/USDC pool held 8.37M USDG and 11.67M USDC. A 7M USDC buy returned 6.99M USDG, a 0.15% shortfall. An 8.3M buy returned 8.20M, a 1.18% shortfall. A 9M buy returned 8.35M. The inbound bridge limit is 25M USDG per day. That route can repay a borrower, or fund a liquidator who bridges before calling liquidation. It cannot fund a flash-loan liquidation. This quote is from 22 October, two days after the other figures.
Selling USDG
| Sell USDG for USDC |
Output (USDC) |
Price impact |
| 1,000,000 |
999,699 |
0.03% |
| 2,000,000 |
1,998,436 |
0.08% |
| 3,000,000 |
2,995,979 |
0.13% |
| 3,100,000 |
2,995,979 |
3.36% |
| 3,200,000 |
2,995,979 |
6.38% |
| 3,300,000 |
2,995,979 |
9.21% |
Source: Fluid USDG/USDC and the Uniswap v4 quoter, best split, impact against par, 20 October 2026.
GMX GM pools are left out because keepers execute their swaps, so they cannot fill in one transaction.
About 3.0M USDG can be sold near par: 2.55M into Fluid and 0.45M into Uniswap v4. Fluid provides 85% of the sellable depth. No issuer or ecosystem liquidity commitment has been disclosed.
2.2 Volatility and Peg History
Source: Chainlink USDG/USD on Arbitrum and Ethereum, 20 October 2026.
The feed has stayed within 0.35% of $1 since August 2025, with 98.9% of rounds inside the 0.25% deviation band. Five single rounds broke the band, and each reverted within 1 to 13 minutes. The extremes were 0.99741 on January 31, 2026 and 1.00346 on February 6, 2026. The Ethereum feed stayed within 0.30% of $1 over the same period, with 99.3% of rounds inside the band and three single-round breaks, each back inside within 13 minutes.
2.3 Exchanges and Growth
The Arbitrum Foundation states that Kraken supports USDG deposits and withdrawals on Arbitrum One. Kraken’s support page does not yet show Arbitrum for USDG. OKX supports USDG on X Layer, KuCoin on Robinhood Chain and Bullish on Solana. On Arbitrum, arbitrage runs through Paxos mint and redeem, DEX liquidity and Kraken. Arbitrum supply rose from 30.75M on 13 October to 33.24M: Paxos minted 12.5M and burned 1.05M on the chain, while a net 8.95M left over the bridge.
2.4 Oracle and Price Feed Treatment
A Chainlink USDG/USD feed is live on Arbitrum. It has a 0.25% deviation threshold and a 24-hour heartbeat, and Chainlink classes it as medium risk. Its latest round before our October 20 read was at 1.00002 on October 19, 2026, 16:38 UTC, inside the heartbeat. The deviation threshold matches the X Layer feed and is wider than the 0.1% threshold on the Arbitrum USDC/USD and USDT/USD feeds, which Chainlink classes as low risk.
As a non-collateral asset priced by an aggregated off-chain feed, USDG presents little manipulation surface on Arbitrum. The relevant risk is an upward print raising the value of USDG debt, which the 1.04 price cap bounds. Ethereum Core, Ink and X Layer all price USDG with the Chainlink USDG/USD feed under the stable price cap adapter at 1.04.
3. Smart Contract Security
3.1 Architecture and Access Controls
Source: Role grants, OFT owner and endpoint delegate onchain, and Paxos’s token and cross-chain repositories, 20 October 2026.
0x3aF3…024B is the Paxos admin EOA also used on Ethereum and X Layer. As set out in our Core assessment, Paxos runs it on offline HSMs that need several people to approve each action. This cannot be verified onchain.
Token upgrades and role changes sit behind a 24-hour timelock.
Pause, freeze and wipe stay instant so the issuer can halt transfers or freeze an address during an incident. Mint limits, bridge peers, rate limits, DVNs, confirmations and the OFT wrapper implementation can also be changed with no delay.
3.2 Multi-Chain Evaluation Scope
The OFT wrapper burns USDG when it leaves Arbitrum and mints it when it arrives, through SupplyControl. Arbitrum is connected only to Ethereum, so USDG moving between Arbitrum and any other chain goes through Ethereum. Of the chains where USDG is listed on Aave V3, Ethereum, Ink and X Layer all use the non-upgradeable wrapper. Arbitrum’s is upgradeable, and the owner can upgrade it with no delay.
The required set is 3 of 3, with no optional verifier: LayerZero Labs, Paxos, and Canary, in both directions. Messages from Ethereum wait 15 Ethereum confirmations, and messages from Arbitrum wait 40 Arbitrum confirmations. The Ethereum side mirrors both settings. Both sides pin their own LayerZero send and receive libraries, and the verifier settings sit on those libraries, so a change to LayerZero’s defaults would not alter them. With no optional DVNs, an outage at any one verifier halts the route, and Paxos operates one of the three. The configuration is controlled by one Paxos address, the owner of the OFT wrapper and the endpoint delegate. That address can change DVNs, libraries, rate limits, and the wrapper with no delay. We rate this as a medium risk. A bad change could halt the bridge route or mint unbacked USDG on Arbitrum.
Rate limits
Each direction is a 25,000,000 USDG bucket per 24 hours, and one message can take whatever is left in the bucket. At the read, 1.07M was in flight outbound and none inbound. Inbound minting is also bounded by the wrapper’s SupplyControl limit: a 25M bucket refilling at 290 USDG per second, about 25.1M per day, so it is no tighter than the bridge limit. The busiest day so far was 6.90M outbound on October 8, 28% of the limit, and 4.78M inbound on October 6, 19%. The most in any 24 hours was 12.95M outbound, about half the limit.
Bridging times
Transfers took a median of 192 seconds from Ethereum to Arbitrum across 147 transfers and 48 seconds in the other direction across 19 transfers.
Exit and escrow
There is no lockbox: USDG is burned and minted on every chain, so Arbitrum supply is not backed by an escrow on Ethereum. Arbitrum’s only peer is the Ethereum OFT. The Ethereum OFT also connects to Ink, X Layer, Mantle, Robinhood Chain, and Solana, so USDG moving between Arbitrum and any of those chains goes through Ethereum. A forged inbound message to Arbitrum would have to pass the 3/3 DVN set and is capped by the rate limits.
3.3 Audit Coverage
USDG’s token contracts were audited by Zellic, Trail of Bits and Halborn, as listed in our Core assessment. Zellic also audited the claimable-rewards module. Zellic reviewed the upgradeable bridge wrapper in February 2026 and reported no critical, high or medium findings, one low and four informational. The deployed implementation (0xb01e…e8ce) is a verified exact match to OFTWrapperUpgradeable.sol in Paxos’s public repository. However, Zellic’s scope was a code diff in a private Paxos repository, so we cannot independently confirm that the deployed code is the audited code.
3.4 Bug Bounty Program
The Paxos bug bounty on Cantina is live, with up to 1M USDG for critical findings, and covers USDG and cross-chain bridging.
3.5 Dependency Risk
USDG on Arbitrum depends on Paxos’s offchain mint, redemption and reserve operations (backing asset review, Core assessment), on the three LayerZero verifiers for the Ethereum route, and on the Chainlink USDG/USD feed for pricing.
4. Regulatory Risk
Regulatory and legal aspects of USDG were assessed in our backing asset review and Core assessment, with no material changes identified. They are omitted here for brevity.
Disclaimer
This review was independently prepared by LlamaRisk, a DeFi risk service provider 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.
