Summary
LlamaRisk recommends the following cap changes to accommodate the planned onboarding of USDe on Aave V3 MegaETH:
- Increase supply cap for USDm on Aave V3 MegaETH from 100,000,000 to 200,000,000.
- Increase borrow cap for USDm on Aave V3 MegaETH from 95,000,000 to 190,000,000.
USDm (Aave V3 MegaETH)
USDm is currently at 14.7% supply cap utilization (14,719,678 / 100,000,000) and 0.1% borrow cap utilization (93,737 / 95,000,000) on the Aave V3 MegaETH instance. The reserve is configured with LTV 0% and cannot be used as collateral. Borrowing is enabled.
Market Context
USDm is a USD-pegged stablecoin and the reserve is presently in an early adoption phase on MegaETH. The proposed cap increase is preemptive, intended to accommodate demand expected to materialize on the imminent listing of USDe on the same instance. Once USDe is listed, the anticipated usage pattern is a leveraged stablecoin loop where depositors supply USDe as collateral and borrow USDm to recycle yield. In that configuration, the main driver of borrow demand is the USDe-collateralized leg, and headroom on the USDm borrow cap is the binding constraint for loop size.
Risk Profile
USDm tracks the US dollar and has historically traded within a narrow band around its peg. As a non-collateral asset (LTV 0%), it does not contribute to liquidation risk on the supply side, and depositors carry no collateral exposure to the asset. On the borrow side, any future USDe / USDm loop pairs two USD-pegged stablecoins, where collateral and debt values are highly correlated.
Recommendation
Given the planned USDe listing on Aave V3 MegaETH and the structurally low liquidation risk of a correlated stablecoin loop, we recommend doubling both the supply and borrow caps to provide headroom for expected demand.
Specification
| Instance | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| Aave V3 MegaETH | USDm | 100,000,000 | 200,000,000 | 95,000,000 | 190,000,000 |
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.