As Michigan Blockchain, while we are aware of the potential benefits it may bring, we are against onboarding pufETH to Aave V3 Core instance. Let’s begin with the benefits of passing this proposal first. It could diversify options for Aave users looking to earn Ethereum staking and liquid restaking rewards in addition to traditional borrowing and lending income. Also, Puffer being audited and backed by Binance Labs, Coinbase Ventures etc. is a trustworthy option for potential Defi users looking to get yields from Ethereum restaking. However, pufETH is lacking in the most important aspect for DeFi usage, and that is liquidity and inflow/outflows. As of today, pufETH circulating supply is only 71,253 and there is a clear downtrend in the circulating supply. The supply peaked at around 530k and fell down to only 71,253 in less than four months, which highlights the low demand and extreme volatility of pufETH.
pufETH Supply chart
It can be inferred that many pufETH users were simply people farming their airdrop, and after the airdrop ended, many users decided to unlock their provided ETH. Since there is declining interest in the project and since pufETH has very low liquidity which will decrease further if the down-trend continues, it should not be onboarded on Aave as low liquidity definitely poses threats for users borrowing against it in Aave V3 Core instance. The Core instance of Aave V3 prioritizes highly liquid, stable assets, and pufETH does not yet meet these criteria.
-Kerem Dillice and nsks