[TEMP CHECK] Add PYUSD to Aave v3 Ethereum Market

Governance New Asset
1

Simple Summary

This AIP proposes the onboarding of the PYUSD stablecoin, minted by Paxos Trust Company, into the Aave V3 Ethereum pool.

Motivation

PYUSD is a USD-pegged stablecoin minted through Paxos. While it’s still young, it has grown to a circulating supply of over $230M with strong peg resilience. Onboarding this asset into Aave will:

  • Build synergies between Aave and PYUSD.
  • Offer Aave users an additional stablecoin option.
  • Strengthen the relationship between the PYUSD & the GHO stablecoin. (Trident may explore the deployment of a PYUSD/GHO pool)

We propose a PYUSD onboarding outside isolation mode but without collateral properties.

If the community deems that PYUSD as collateral is immediately viable we stand ready to support that role on day one; otherwise following PYUSD maturity, the Aave governance can propose a collateral activation for PYUSD at a later stage.

Specification

Ticker: PYUSD
Contract address: 0x6c3ea9036406852006290770bedfcaba0e23a0e8
Price Feed: 0x8f1df6d7f2db73eece86a18b4381f4707b918fb1

Chainlink Oracle: https://data.chain.link/ethereum/mainnet/stablecoins/PYUSD-usd

We propose the following parameters for a PYUSD onboarding:

Parameter Value
Isolation Mode No
Borrowable Yes
Collateral Enabled No
Supply Cap (PYUSD) 25M
Borrow Cap (PYUSD) 20M
Debt Ceiling N/A
LTV N/A
LT N/A
Liquidation Bonus N/A
Liquidation Protocol Fee 10.00%
Variable Base 0.00%
Variable Slope1 7.00%
Variable Slope2 80.00%
Uoptimal 80.00%
Reserve Factor 10.00%
Stable Borrowing Disabled
Stable Slope1 13.00%
Stable Slope2 300.00%
Base Stable Rate Offset 3.00%
Stable Rate Excess Offset 8.00%
Optimal Stable To Total Debt Ratio 20.00%
Flashloanable No
Siloed Borrowing No
Borrowed in Isolation No

Liquidity and Market Cap

The PYUSD token was introduced a few months ago, and since its launch, its market cap has increased to approximately $230million. Over the coming weeks the pool will be scaled further with incentives in order to reach the necessary liquidity to support the proposed market parameters.

When analyzing market cap and trading volumes of assets for listing, we look at the available historical data. The 30 Day average Market Cap of PYUSD is $170M with a 30 day average volume of $4.7M. Over the last 7 days, the average Market cap has climbed to $209M with the same period seeing an average volume of $8.7M, the volume and aum increase is on the back of prior stakeholder efforts and we expect both to grow meaningfully in the coming weeks.

With peg holding well since inception, an average intra-day volatility of ~0.01%, and the ability of onboarded institutional investors to redeem PYUSD 1:1 with Paxos, we see low risk related to the stability of PYUSD’s price.

Initial Supply and Borrow Caps

PYUSD circulating supply is ~$230M. Given PYUSD is a new asset listing, we recommend adopting a conservative approach for setting supply and borrow caps for PYUSD, which gives room to expand caps should cap usage be elevated. We recommend a supply cap of 25M and a borrow cap of 20M.

Variable Borrow Rate

We recommend setting slope 1 to 7% due to current on-chain stable yield opportunities which we believe will remain viable for the foreseeable future.

Borrowable in Isolation

We do not see excess risk with enabling PYUSD being borrowable in isolation. If the community wishes to take a more conservative stance, it may wish to only limit PYUSD borrowing to non-isolated collateral.

Next Steps:

  1. Gather community feedback on this TEMP CHECK.
  2. If consensus is reached, escalate this proposal to TEMP CHECK snapshot stage.
  3. If TEMP CHECK snapshot outcome is YAE, escalate to ARFC stage.
  4. If consensus on ARFC stage is reached and risk service providers provide feedback on risk parameters, escalate to ARFC snapshot stage.
  5. If ARFC snapshot stage outcome is YAE, escalate to AIP stage

Disclosure

@mv_Trident works with Trident who has been contracted by Paxos in order to improve the on-chain liquidity and utility of its issued assets.

Copyright

Copyright and related rights waived via CC0 .

3 Likes
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Thanks @mv_Trident and welcome to the forum.

Do you, or any of the other [TEMP CHECK] authors have any affiliation with any of the mentioned organizations?

Typically [TEMP CHECK]'s contain a disclosure.

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Hey I appreciate you flagging that omission from our proposal. Have added what I hope to be a proper disclosure

cheers

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Thanks for this proposal. Please check the Asset Onboaridng framework for the template for the TEMP CHECK. I think you’ve included most of the important info here, but we wouldn’t need to look at listing parameters until ARFC stage.

Also would be interested to hear if Trident, Paxos or another party would be providing liquidity on Aave for borrowing? Or there is some budget for incentives for this market? This would be helpful to understand ultimate borrow demand and market size.

We are on a short governance hiatus as Gov v3 gets online, but can expect @ACI Skywards will move this to snapshot shortly after.

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Thanks for your feedback, was happy to include the parameters now but good to know in the future we don’t need to post the parameters in the initial stage.

Appreciate your response!

One of my associates will respond shortly to confirm liquidity plans

6

Thank you for the question. Paxos and other parties will be contributing on day 1. Minimum 5 million, more likely 10 million.

We are the team incentivizing the PYUSD/USDC pool on Curve. The idea is to keep yields quite high on Curve. This will create organic borrowing demand for PYUSD on AAVE. So while we don’t intend to provide direct incentives on AAVE we believe our overall incentive strategy will allow for borrowing demand on day 1.

As the market cap of PYUSD grows and borrowing demand follows on AAVE we intend to replicate this strategy with GHO/PYUSD. Clearly this is market dependent but that is our intention at this time.

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Hey Togbe, happy new year.

Wanted to make sure this didn’t get lost track of in the holiday period.

Any idea whether we should we expect the gov hiatus to end soon?

Appreciate your attention and guidance!

-M

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Hiatus is just ending and first proposals are being worked through Governance v3 now. This and other pending snapshots will go up in the upcoming week or so.

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This proposal has been escalated to the TEMP CHECK Snapshot stage

Vote starts tomorrow.

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The TEMP CHECK Snapshot has passed, reaching quorum with 468K YAE votes.

Next step will be posting an ARFC to gather more feedback from community and risk service providers to move forward with the governance process if applicable.

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Thanks for following up here. For the ARFC does our side need to make that post or does ACI typically handle (as with snapshot vote)?

If the latter, don’t hesitate to let us know if there’s any way we can help in the preparation of subsequent steps

cheers

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As this proposal is being powered by Skywards, ACI will take care of next steps such as preparing and posting the next ARFC, while at the same time getting service providers feedback on risk paramaters.

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This proposal has moved to the ARFC stage so this thread will be closed.

1 Like