LlamaRisk - Monthly Community Update

[LlamaRisk]

LlamaRisk - Monthly Community Update

March 2025

Overview

LlamaRisk presents our March 2025 monthly update, summarizing key activities and outlining upcoming priorities.

Highlights

Recommendations and inputs

Asset onboarding

• [ARFC] Onboard scETH, scUSD, and scBTC to Aave V3 Sonic Instance - Supported onboarding scUSD and scETH while advising against scBTC due to low liquidity.
• [ARFC] Add USR to Aave v3 Core Instance - Recommended onboarding, contingent on establishing a formal bug bounty program, which was recently implemented.
• [ARFC] Add wstUSR to Aave v3 Core Instance - Recommended onboarding, contingent on establishing a formal bug bounty program, aligning with our stance on USR.
• [ARFC] Add stS to Aave v3 Sonic Instance - Supported onboarding while highlighting an OPERATOR_ROLE misassignment to the deployer EOA, which was subsequently fixed by the team.
• [ARFC] Add AAVE token to Aave V3 Base Instance - Supported onboarding as collateral-only on Base with conservative parameters due to sufficient liquidity, distribution, and established presencee.

New chain

• [ARFC] Deploy Aave v3 on Plasma - Engaging with Plasma’s team to address information gaps, as the network’s early stage makes issuing a recommendation not possible.
• [ARFC] Deploy Aave v3 on megaETH - Provided preliminary support for deployment, with asset recommendations to follow as mainnet launch approaches.
• [ARFC] Enhancements in Aave v3 Gnosis Chain Instance - Supported switching to USDC.e, recommending a 0 LTV for USDC and a 4M sDAI borrow cap to mitigate uncertainty in sDAI loan demand.
• [ARFC] Deploy Aave on Soneium - Supported deployment while noting reliance on bridged USDC and USDT due to the absence of natively minted alternatives.

GHO related

• [ARFC] Launch GHO on Gnosis Chain - Supported deployment while emphasizing GSMs’ role in fostering GHO growth and enabling sGHO roll-out.
• [ARFC] GHO Gas Token Framework - Supported the proposal, recognizing its potential to enhance GHO adoption and utility.
• [ARFC] Launch GHO on Sonic & set ACI as Emissions Manager for Rewards - Supported the proposed GHO risk parameters, including CCIP integration and GhoDirectMinter configurations.
• [TEMP CHECK] GHO Aave Savings Upgrade - Recognized the potential benefits of the implementation while highlighting the risk of USDC yield dilution due to increased sGHO supply via stataGSMs.

E-modes

• [ARFC] wstETH and weETH E-Modes and LT/LTV Adjustments on Ethereum, Arbitrum, Base - 03.12.25 - Supported the proposed parameter changes while noting the low likelihood of LST slashing triggering liquidations at high LTVs.
• [ARFC] rsETH LTV & LT Update - Supported the parameter changes while analyzing edge case scenarios, including potential ETHx slashing risks.
• [ARFC] Add support for Wrapped Origin Sonic (wOS) to Aave v3 - Supported onboarding and recommended a wOS/s E-Mode to enhance capital efficiency.
• [ARFC] Enable eBTC/WBTC liquid E-Mode on Aave v3 Core Instance - Recommended using CAPO with Chainlink’s BTC/USD feed for LBTC pricing and suggested a higher supply cap based on improved liquidity.

Legal Commentary

• [Temp Check] Building Horizon’s RWA Product: An Aave Licensed Instance for Institutions - Expressed interest in collaborating with Aave Labs on an RWA-integrated structure, referencing case studies of similar setups in crypto protocols.
• [ARFC] Add bCSPX to Aave V3 Gnosis Instance - Addressed a delegate’s inquiry by providing regulatory clarification on bCSPX listing.
• [ARFC] Aavenomics implementation: Part one - Supported the proposal and provided key insights on the potential legal ramifications of this update.

Misc.

• [ARFC] Aave Umbrella - activation - Commended the update and shared ongoing work on our Umbrella capitalization methodology.
• [ARFC] Aave <> Chainlink SVR v1. Phase 1 activation - Supported the proposal while highlighting synchronization challenges and recommending a phased roll-out to mitigate risks.
• [ARFC] Stablecoin Interest Rate Curve Update - 03.04.2025 - Supported the proposed adjustments and analyzed their implications on stablecoin borrowing dynamics.
• [ARFC] Adjust Risk Parameters for Aave V2 and V3 on Polygon - Supported the changes while recommending a preference for non-rehypothecated assets within Aave’s Polygon market.
• [ARFC] BGD. Aave ClinicSteward - Supported the elimination of legacy bad debt via the Aave Collector, which we flagged earlier.
• [ARFC] Orbit Program Renewal - Q1 2025 - Supported the Orbit program, emphasizing the importance of a strong delegate ecosystem for Aave DAO.
• [ARFC] Onboard Pendle PT tokens to Aave V3 Core Instance: Supported BGD Labs’ dynamic linear discount oracle for Pendle PTs as a balanced pricing solution with appropriate governance controls.

Research and analysis

• LlamaRisk Insights: sGHO Legal Implications - Analyzed key regulatory considerations for stablecoins in the EU, Singapore, and Dubai, assessing their implications on sGHO.
• Collateral Risk Assessment - pufETH - Published a collateral risk assessment, analyzing system architecture, dependency management, smart contract security, oracle integration, market risk, and access control.

Community Engagement

• Newsletter: This Week in Aave - Continued delivering weekly roundups of Aave governance updates while enhancing content with deeper insights for stakeholders and users.

Upcoming Focus Areas

• Operation Spring Cleaning - Launch is just around the corner, with a dashboard for asset scoring based on access control, security, legal, dependency, and transparency metrics for DeFi protocols.
• In the process of peer reviewing and backtesting our methodology for Umbrella liquidity targets.
• Monitoring Chainlink SVR V1 (Smart Value Recapture oracles) while providing support and analysis for further parameterization and roll-out.

We welcome community feedback and suggestions. Please share any questions, ideas, or areas where you would like increased focus from the LlamaRisk team.