Summary
LlamaRisk recommends the following parameter changes based on user behavior, on-chain liquidity, and position health observed in the latest review of Aave V3 reserves.
Aave V3 Monad:
- Increase supply cap for PT-AUSD-8OCT2026 from 40,000,000 to 80,000,000.
- Increase supply cap for USDe from 120,000,000 to 220,000,000.
- Increase baseVariableBorrowRate for USDe from 1.00% to 2.00%.
Aave V3 Plasma:
- Increase supply cap for USDe from 375,000,000 to 450,000,000.
- Increase baseVariableBorrowRate for USDe from 1.00% to 2.00%.
- Increase optimalUsageRatio for USDT0 from 92.00% to 94.00%.
Aave V3 Core:
- Increase baseVariableBorrowRate for USDe from 1.00% to 2.00%.
- Increase optimalUsageRatio for USDC from 92.00% to 94.00%.
- Increase optimalUsageRatio for USDT from 92.00% to 94.00%.
- Reduce variableRateSlope1 for WETH from 2.35% to 2.20%.
Aave V3 Avalanche:
- Increase baseVariableBorrowRate for USDe from 1.00% to 2.00%.
Aave V3 Mantle:
- Increase baseVariableBorrowRate for USDe from 1.00% to 2.00%.
Aave V3 Arbitrum:
- Reduce variableRateSlope1 for WETH from 2.50% to 2.20%.
Aave V3 Optimism:
- Reduce variableRateSlope1 for WETH from 2.50% to 2.20%.
PT-AUSD-8OCT2026 (Aave V3 Monad)
PT-AUSD-8OCT2026 sits at 100.0% supply cap utilization (40,000,000 / 40,000,000). The reserve is collateral-only and is enabled in E-Mode category 5, PT_Agora__Stablecoins, at 93.0% LTV and 95.0% LT.
Supply Distribution
Source: LlamaRisk, August 31, 2026
The top eighteen suppliers have health factors between 1.01 and 1.32, with a median of 1.02, and all eighteen carry outstanding debt. The suppliers prominently borrow USDC against the PT collateral, followed by GHO, USDe, and USDT0, so the cohort holds stablecoin debt against a stablecoin-denominated PT whose health factor tracks the PT’s discount to par rather than a directional price.
The tight health factor cluster is the expected steady state for this pairing: both legs of every position are dollar-denominated, and the 95.0% liquidation threshold in the PT_Agora__Stablecoins category permits positions to sit close to the limit without the collateral and debt diverging. The proposed cap of 80,000,000 is 2.00x the current outstanding supply, resulting in approximately 50.0% post-change cap utilization.
USDe (Aave V3 Monad)
USDe sits at 100.0% supply cap utilization (120,001,531 / 120,000,000). The reserve is enabled as collateral in E-Mode category 2, USDe_sUSDe__Stablecoins, at 90.0% LTV and 92.0% LT.
Supply Distribution
Source: LlamaRisk, August 31, 2026
The top twenty suppliers have health factors between 1.01 and 1.32, with a median of 1.02, with eighteen carrying outstanding debt and two supplying on a spot basis. Borrowing is denominated in USDT0 and USDC against USDe collateral held in the stablecoin E-Mode category at LTV 90.0% and LT 92.0%, so the health factor’s stability tracks the USDT peg because USDe is priced in par with USDT.
The proposed cap of 220,000,000 is approximately 1.83x the current outstanding supply, resulting in approximately 54.5% post-change cap utilization.
USDe (Aave V3 Plasma)
USDe sits at 99.8% supply cap utilization (374,072,211 / 375,000,000).
Supply Distribution
Source: LlamaRisk, August 31, 2026
The top ten suppliers have health factors between 1.01 and 1.05, with a median of 1.03, with seven carrying outstanding debt and three supplying on a spot basis. All seven borrow USDT0, against USDe and sUSDe collateral. Supply is concentrated, with the largest position holding 73.0% of the reserve and the top five holding 82.8%. Since USDe is priced at par with USDT, the health factor consequently tracks the USDT peg, and therefore, the liquidation risk of these positions is very low.
The proposed cap of 450,000,000 is approximately 1.20x the current outstanding supply, resulting in approximately 83.1% post-change cap utilization.
USDe Interest Rate Model
The recommendation raises the USDe base rate by 100 BPS on all five deployments that carry USDe, in line with the stablecoin interest rate changes proposed by TokenLogic.
| Instance | Utilization | uOptimal | Current Borrow APR | New Borrow APR | Delta |
|---|---|---|---|---|---|
| Aave V3 Core | 64.1% | 90.0% | 3.85% | 4.85% | +100 BPS |
| Aave V3 Plasma | 46.8% | 85.0% | 3.20% | 4.20% | +100 BPS |
| Aave V3 Monad | 30.0% | 90.0% | 2.33% | 3.33% | +100 BPS |
| Aave V3 Mantle | 23.2% | 85.0% | 2.09% | 3.09% | +100 BPS |
| Aave V3 Avalanche | 81.7% | 80.0% | 9.13% | 10.13% | +100 BPS |
Because the optimal utilization point is unchanged on all five reserves, the share of supply held as withdrawal liquidity at that point is unchanged, and the borrowable capacity below the optimal point is unchanged. The recommendation raises the price of USDe borrowing without altering the quantity available.
Optimal Utilization Increases
The USDe base rate increase recommended in this batch raises the cost of USDe borrowing, which may move borrowing demand toward the other stablecoin reserves on the same markets. USDC and USDT on Aave V3 Core hold 56.13M units of combined capacity below the optimal utilization kink, against 428M of USDe debt outstanding on that market. USDT0 on Aave V3 Plasma is already past its kink at 92.4% utilization, so it prices on Slope2 today and has no capacity below the optimal point at all. Raising the optimal utilization point to 94.00% on all three widens the absorption capacity for migrating USDe debt.
| Instance | Asset | Total Supply | Current Debt | Debt at Current Optimal | Debt at Recommended Optimal | Added Capacity |
|---|---|---|---|---|---|---|
| Aave V3 Core | USDC | 2,279,985,080 | 2,060,524,444 | 2,097,586,274 | 2,143,185,976 | 45,599,702 |
| Aave V3 Core | USDT | 2,950,080,699 | 2,695,007,347 | 2,714,074,243 | 2,773,075,857 | 59,001,614 |
| Aave V3 Plasma | USDT0 | 601,490,285 | 555,846,706 | 553,371,062 | 565,400,868 | 12,029,806 |
The change adds approximately 116.63M units of borrowable capacity below the optimal point across the three reserves. Headroom to the kink extends from 37.06M to 82.66M on USDC and from 19.07M to 78.07M on USDT, taking the Aave V3 Core figure from 56.13M to 160.73M. USDT0 on Aave V3 Plasma moves from a 2.48M shortfall against its current kink to 9.55M of headroom above it.
Exit Buffer
Added capacity and reduced buffer represent the same quantity viewed from opposite sides of the reserve. Every unit of additional borrowing capacity available below the optimal point corresponds to one unit of liquidity no longer held in reserve at that point. Under the proposed parameters, liquidity available for withdrawal at the optimal point decreases from 8.00% to 6.00% of supply, representing a 25.00% relative reduction for each reserve.
Rate Response
Below the current optimal utilization kink, the recommended curve results in a marginally lower borrow APR, as Slope1 is distributed across a wider utilization range. At current utilization this reduces the borrow rate by approximately 9 bps on USDC and USDT. USDT0 on Aave V3 Plasma sits above its kink and therefore prices on Slope2, so moving the kink above its current utilization takes its borrow rate from 4.61% to 4.03%, a reduction of approximately 58 bps.
The borrow rate at full utilization remains unchanged at 14.10%, preserving the compensation received by suppliers when the reserve is fully utilized. The reduction in withdrawal liquidity at the optimal point warrants monitoring on USDT0 on Plasma, which carries the smallest absolute buffer of the three.
WETH Interest Rate Model
The recommendation sets Slope1 to 2.20% on the three deployments listed below in line with the WETH Interest Rate Adjustment proposal by TokenLogic. Each reserve is below its optimal level, so the reduction is reflected in the current borrow rate in proportion to utilization.
| Instance | Utilization | uOptimal | Current Slope 1 | Recommended Slope 1 | Current Borrow APR | New Borrow APR | Delta |
|---|---|---|---|---|---|---|---|
| Aave V3 Core | 84.8% | 92.0% | 2.35% | 2.20% | 2.17% | 2.03% | -14 BPS |
| Aave V3 Arbitrum | 83.1% | 92.0% | 2.50% | 2.20% | 2.26% | 1.99% | -27 BPS |
| Aave V3 Optimism | 74.8% | 90.0% | 2.50% | 2.20% | 2.08% | 1.83% | -25 BPS |
The change brings the three deployments onto a common first slope of 2.20% and lowers the rate at the optimal utilization point to 2.20% on each. The second slope is unchanged, so the rate response above the optimal point is unaffected, and the incentive to repay or supply during a liquidity squeeze is preserved. Utilization across all three reserves is within 9 percentage points of the optimal point, so the reduction warrants monitoring for a sustained rise in utilization toward the kink.
Specification
Caps
| Instance | Asset | Current Supply Cap | Recommended Supply Cap |
|---|---|---|---|
| Aave V3 Monad | PT-AUSD-8OCT2026 | 40,000,000 | 80,000,000 |
| Aave V3 Monad | USDe | 120,000,000 | 220,000,000 |
| Aave V3 Plasma | USDe | 375,000,000 | 450,000,000 |
IRM
| Instance | Asset | Current Base Variable Rate | Recommended Base Variable Rate |
|---|---|---|---|
| Aave V3 Core | USDe | 1.00% | 2.00% |
| Aave V3 Avalanche | USDe | 1.00% | 2.00% |
| Aave V3 Mantle | USDe | 1.00% | 2.00% |
| Aave V3 Monad | USDe | 1.00% | 2.00% |
| Aave V3 Plasma | USDe | 1.00% | 2.00% |
| Instance | Asset | Current Optimal Utilization | Recommended Optimal Utilization |
|---|---|---|---|
| Aave V3 Core | USDC | 92.00% | 94.00% |
| Aave V3 Core | USDT | 92.00% | 94.00% |
| Aave V3 Plasma | USDT0 | 92.00% | 94.00% |
| Instance | Asset | Current Slope 1 | Recommended Slope 1 |
|---|---|---|---|
| Aave V3 Core | WETH | 2.35% | 2.20% |
| Aave V3 Arbitrum | WETH | 2.50% | 2.20% |
| Aave V3 Optimism | WETH | 2.50% | 2.20% |
Next Steps
We will move forward and implement these updates via the Risk Steward process.
Disclosure
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.