Summary
LlamaRisk recommends the following parameter changes based on user behavior, on-chain liquidity, and position health observed in the latest review of Aave V4 reserves.
Aave V4 Ethereum:
- Increase the add cap for USDC on the Core Hub Main Spoke from 40M to 50M.
- Increase the add cap for USDT on the Core Hub Main Spoke from 40M to 50M.
- Increase the add cap for USDC on the Core Hub Forex Spoke from 10M to 15M.
- Increase the draw cap for USDC on the Core Hub Forex Spoke from 3.33M to 5M.
- Increase the add cap for USDT on the Core Hub Forex Spoke from 10M to 15M.
Aave V4 Avalanche:
- Increase the add cap for USDt on the Core Hub Main Spoke from 10M to 20M.
USDC and USDT (Ethereum Core Hub)
USDC on the Aave V4 Ethereum Core Hub holds 32.90M added and 30.67M drawn, for a hub utilization of 93.2%, and USDT holds 27.68M added and 22.69M drawn, for a hub utilization of 82.0%, both against an optimal usage ratio of 92.00%.
| Spoke | Asset | Added | Add Cap | Add Cap Utilization | Drawn | Draw Cap | Draw Cap Utilization |
|---|---|---|---|---|---|---|---|
| Main | USDC | 24,584,515 | 40,000,000 | 61.5% | 19,162,838 | 36,000,000 | 53.2% |
| Main | USDT | 21,274,629 | 40,000,000 | 53.2% | 14,381,553 | 30,000,000 | 47.9% |
| Forex | USDC | 8,084,810 | 10,000,000 | 80.8% | 3,325,802 | 3,330,000 | 99.9% |
| Forex | USDT | 6,365,003 | 10,000,000 | 63.7% | 2,888 | 3,330,000 | 0.1% |
Recommendation
The USDC and USDT add cap increases on the Main Spoke, expand stablecoin supply capacity on the Core Hub ahead of upcoming Babylon Native BTC collateral listings, which may draw on Core Hub liquidity. The proposed add caps of 50M land at approximately 49.2% post-change add cap utilization for USDC and 42.5% for USDT.
On the Forex Spoke, the USDC draw cap is fully utilized, and the USDC add cap is 80.8% utilized. The proposed USDC draw cap of 5M results in approximately 66.5% post-change draw cap utilization, and the proposed add caps of 15M result in approximately 53.9% for USDC and 42.4% for USDT.
USDt (Avalanche Core Hub)
USDt on the Aave V4 Avalanche Core Hub holds 9.62M added and 2.48M drawn, for a hub utilization of 25.7% against an optimal usage ratio of 90.00%.
| Spoke | Added | Add Cap | Add Cap Utilization | Drawn | Draw Cap | Draw Cap Utilization |
|---|---|---|---|---|---|---|
| Main | 8,791,525 | 10,000,000 | 87.9% | 2,444,125 | 5,000,000 | 48.9% |
Recommendation
The USDt add cap on the Main Spoke is 87.9% utilized. The proposed add cap of 20M lands at approximately 44.0% post-change add cap utilization.
Specification
Add Caps
| Hub | Spoke | Asset | Current Add Cap | Recommended Add Cap |
|---|---|---|---|---|
| Ethereum Core | Main | USDC | 40,000,000 | 50,000,000 |
| Ethereum Core | Main | USDT | 40,000,000 | 50,000,000 |
| Ethereum Core | Forex | USDC | 10,000,000 | 15,000,000 |
| Ethereum Core | Forex | USDT | 10,000,000 | 15,000,000 |
| Avalanche Core | Main | USDt | 10,000,000 | 20,000,000 |
Draw Caps
| Hub | Spoke | Asset | Current Draw Cap | Recommended Draw Cap |
|---|---|---|---|---|
| Ethereum Core | Forex | USDC | 3,330,000 | 5,000,000 |
Next Steps
We will move forward and implement these updates via the Risk Steward process. The implemented changes can be reviewed on the LlamaRisk Risk Stewards Dashboard.
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.