Risk Parameter Recommendations for New Asset Listings

[ChaosLabs]

Simple Summary

Gauntlet and Chaos Labs recommend a framework for the listing process of new assets to Aave V3 markets. This framework aims to improve community clarity and define expected timelines for risk parameter recommendations.

Motivation

With the recent deployment of Ethereum V3 and the motivation to shift usage to V3 markets with a variety of risk mitigation mechanisms, there is a need for a community framework for recommending risk parameters in the listing of new assets.

In the process of onboarding new assets, Gauntlet and Chaos Labs will conduct individual risk assessments on proposed assets to provide the community with clear and rigorous risk analyses and parameter recommendations and maximize the advantages of multiple risk vendors.

To avoid any community confusion, the parties will coordinate their assessments before posting on the forums to provide the community with joint recommendations in cases where the conclusions converge or a choice between two different proposals with clear explanations of the main considerations and differences between the two, in cases where the conclusions diverge.

Specification

The recommended process for adding a new asset is as follows:

1. ARC to add a new asset, following the ARC Template for Asset Onboarding.
2. 72 hours of community discussion and feedback on the proposal. Given strong community support (see ‘next steps’ below) for listing the proposed asset, the risk managers will proceed with risk assessment and parameter recommendations.
3. 2-week period for risk managers to conduct independent analyses and coordinate the publication of recommendations.
   1. If consensus is reached, provide a joint recommendation to the community
   2. If recommendations are materially different, the parties will present the recommendations while highlighting the key differences and considerations for each one.
4. 5 days of community discussion and feedback on the recommended parameters.
5. Following the community discussion, the party proposing the asset listing will move forward to the voting stage:
   1. Snapshot (72 hours voting period) to decide on community interest in listing the asset and risk parameters preferences.
   2. AIP to add assets with the selected parameter configurations.

Next Steps

• We invite a community discussion around the proposed framework and timelines. We will incorporate this feedback into a revised and final framework to be used in all future asset listings.
• An important aspect for discussion is how to define the needed community support for listing an asset (prior to the risk assessment conducted) without creating additional governance overhead, such as a Snapshot vote. Some initial ideas here:
  • Adding a named poll (yae/nae) to the original post
  • Qualitative analysis of potential revenue/strategic value provided by protocol growth contributors (Llama)

Resources

• Aave Docs - New Asset Listing
• Aave Risk Managers - Collaboration Framework
• Template ARC Asset Onboarding

[oneski22]

Love to see the coordinated effort from both Chaos and Gauntlet.

Question I would like to pose is that while this process is great for assets seeking full collateral status or e-mode etc… for assets simply looking to get listed in isolation mode with a low cap (1-2MM) is the full 2 week review needed?

The risk for the DAO is more clear when listing in isolation mode, as the cap, quality of the asset and oracle are the main factors. Having a faster path will also lead assets to chose to list using this method, giving our risk managers time to analyze the asset in a production market prior to adjusting risk factors / moving out of isolation mode.

[Kene_StableLab]

This is a welcome development in our opinion, getting feedback from Gauntlet and Chaos Labs will be imperative with Aave V3 Asset Listings, we believe this Governance Flow for Asset Listings would be vital in providing context to the community.

Having context before the Snapshot Vote goes up would be a massive improvement to ensuring token holders make informed decisions.

[John_TV_Locke]

tl;dr: looking at revenue to the DAO and usage (by number of users), BAL, SNX, and CVX are top candidates for prioritization for V3 listing.

Hey team, wanted to share some thoughts on V3 asset listing prioritization. Gauntlet and Chaos are on top of the risk concerns, as always. We pulled some data from our Aave V2 subgraph and Dune and sorted by protocol revs over the last 180 days (also did 365 days). Included also depositor revs and average APY for depositors (called LPs to make the chart more readable).

Besides looking at it from an earnings perspective, we wanted to compare the pools on a usage basis to try and see which assets were used by the largest number of users rather than the largest (median more effective but for now we use average). So we also ran a query for the pools with the smallest average open deposit position over the last 180 days. The idea is to get a sense of which pools have a lot of smaller users, so are useful to the community albeit not as large. Some might argue that Ethereum is a whale chain now, in which case the DAO can just focus on the largest revenue opportunities, but we thought it was helpful perspective. We put average daily active deposits and average daily active borrows in that table as well.

Using this framework, SNX, BAL, and CVX all attracted a lot of smaller depositors. It is no coincidence that all of these tokens have lock/stake/or escrow and are yield-bearing, likely causing higher floor for APY. This means there is a real niche there for users who want price exposure to the asset and yield generation but also liquidity. The other side of that token (pun!), is the obvious liquidity considerations for Aave, but perhaps worth prioritizing those for risk assessment and let Gauntlet/Chaos big brains determine the parameters that work.

In terms of partnerships, the Aave-Balancer relationship is strong and with GHO launch opportunities hopefully getting stronger, we are stoked to see Llama already pushing for BAL to be added. Synthetix is also launching V3 soon. It is worth noting that there is a lot of SNX on Ethereum currently in escrow, meaning there are possibly many holders who want to hedge their holdings on Synthetix and could use deeper markets on Aave. One worth exploring there (image below depicts SNX escrow schedule in 2023).

Beyond usage and revenues, if there are other considerations you think are valuable we can try to run those as well.

Thanks and hope helpful