[ARC] Onboarding sfrxETH to Aave V3 Ethereum Market
Vote Result: NO
Rationale
FRAX is one of the more blue-chip names in DeFi, and sfrxETH is a valuable decentralised LSD that would bring revenue, diversity, and liquidity to the Aave ecosystem. This proposal also is in line with the recent proposals to onboard stETH, rETH, and cbETH onto Aave v3 Ethereum, and another positive is that Chaos Labs is in favour of the proposed risk parameters, which account for the lower supply cap. The risk is also mitigated by the ability to unstake to frxETH and the deep liquidity for frxETH on Curve, and by it not being borrowable, or listed in isolation mode or eMode.
However, a main issue is that the protocol contracts have permissions that grant administrators mint/burn capabilities. Leaving withdrawal keys, mint/burn capabilities for sfrxETH, and control of frxETH Curve LPs generated in the hands of the Frax team adds counterparty risk to Aave. sfrxETH has also not been used across other lending and borrowing protocols, and is relatively small in terms of holding with only 3,000 transactions and 858 holders. Its TVL is also almost 7x smaller than the TVL of rETH, the smallest other LSD onboarded by Aave.
Therefore, it may be better to wait for the asset to mature further, decentralise, and reduce counterparty risk from the Frax team before onboarding it to Aave, especially since an Aave v3 onboarding will put Aave in a top position of sfrxETH holding.