ARFC: Adjust Borrowing and Lending Caps, Introduce weETH on Aave V3 zkSync Era
Summary
This proposal suggests:
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Increasing supply and borrow caps for wstETH and weETH on the zkSync Era deployment of Aave V3, based on observed high utilization rates.
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Adding the liquid staking token (LST) weETH as a new asset to expand user options and support zkSync’s ecosystem growth.
Motivation
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High Utilization Rates: Utilization rates for existing LSTs on Aave V3 zkSync, such as wstETH, exceed 90% in both supply and borrow markets. Expanding caps ensures continued market efficiency.
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Diversifying Collateral Options: Adding weETH, a robust LST with growing adoption, enhances collateral diversity and promotes staking yield strategies on Aave.
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Ecosystem Growth: As zkSync scales, Aave can strengthen its position as the leading lending platform by accommodating user demand and fostering LST adoption.
Specification
Cap Adjustments for Existing Assets
New Asset Onboarding
Asset Name: weETH
Contract Address: Ether.fi Contract Address
Parameters:
Isolation Mode: No
Collateral Enabled: Yes
Borrowable: Yes
Supply Cap: 10,000
Borrow Cap: 5,000
Loan-to-Value (LTV): 72.5%
Liquidation Threshold: 75%
Liquidation Bonus: 7.5%
Risk parameters for weETH follow guidelines from similar LSTs like wstETH, leveraging strong on-chain price feeds (via Chainlink) and liquidity support.
Risk Assessment
On-Chain Liquidity: weETH liquidity is concentrated on Maverick and SyncSwap on zkSync, ensuring adequate support for its inclusion.
Correlation with ETH: weETH is highly correlated with ETH, minimizing systemic risks.
User Behavior: Historical data shows weETH’s primary use case as collateral for borrowing ETH derivatives, a low-risk and popular strategy.
Next Steps
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Conduct community feedback and validation of proposed parameters.
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Initiate Snapshot vote for governance approval.
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Execute the proposal