KVORUM
aaveSource: Aave governance v3 · #106

Deprecation of Small-cap Stablecoins on V2 Ethereum

executedMay 19, 2024, 04:22 PM UTCby570x57ab…2922

01Summary

AISummary by Kvorumclaude-haiku-4-5

Proposal to deprecate five smaller stablecoins (USDP, GUSD, LUSD, FRAX, sUSD) on Aave V2 by disabling borrowing, dramatically increasing interest rates and reserve factors, and freezing markets. Phase I aims to encourage loan repayment through higher borrower costs and lower supplier yields.

Type
protocol deprecation

Key changes

  • Reserve Factor increased to 95% for all five stablecoins (from 45-55%), reducing supply APY(high)
  • Borrowing disabled for all five stablecoins(high)
  • Base Rate increased to 3% for all five stablecoins (from 0%)(high)
  • Slope1 increased to 15% for all five stablecoins (from 12%)(medium)
  • Slope2 increased to 200% for all five stablecoins (from 75-150%)(high)
  • UOptimal decreased to 20% for all five stablecoins (from 70-80%)(high)
  • Reserves frozen to prevent new supplies and borrowings(high)

Notable concerns

  • USDP recently experienced volatility and was frozen, triggering this deprecation effort
  • Limited liquidity in these stablecoins creates price manipulation risks
  • Phase I is step one of a multi-phase deprecation process
  • Further parameter adjustments may follow based on Phase I observations
ContractsAave V2 Ethereum - USDP reserveAave V2 Ethereum - GUSD reserveAave V2 Ethereum - LUSD reserveAave V2 Ethereum - FRAX reserveAave V2 Ethereum - sUSD reserve
Generated by Kvorum
model: claude-haiku-4-5
provider: anthropic
profile: anthropic-fast-v1
prompt: v1.0
generated: 2mo ago
Read the description ↗

02Description

561 words

Simple Summary

A proposal to deprecate USDP, GUSD, LUSD, FRAX, and sUSD on Aave V2

Motivation

Following our ongoing efforts to deprecate the V2 markets and following the recent USDP volatility and subsequent freeze, we propose deprecating smaller market cap stablecoins on V2.

Deprecation Phase I

Recent events have highlighted the need for Aave to reduce its V2 exposure to lesser-used stablecoins, many of which have limited liquidity, thus allowing for price manipulation and other potentially harmful events. Previously, the community followed a two-phase process to deprecate stablecoins, with BUSD and TUSD as examples. Given the success of these, we propose a similar path forward. Notably, none of the below stablecoins are collateral assets, reducing the complication of the process.

For USDP, GUSD, LUSD, FRAX, and sUSD we propose the following parameters:

ParameterProposed Value
Reserve Factor95%
Borrowing EnabledNo
Base Rate3%
Slope1+3%
Slope2200%
UOptimal20%

The goal of Phase I is to increase borrower APR to encourage borrowers to repay their loans; this is achieved through higher Base Rate, Slope1, Slope2, and lower UOptimal. Additionally, we recommend leaving them frozen to prevent new supplies and borrowings. Finally, we increase the reserve factor to reduce supply APY, reducing the attractiveness of supply as borrowers pay increased rates.

Following observations from Phase I, we may move to further decrease UOptimal, increase Reserve Factor, and increase Slope2.

Specification

USDP

ParameterCurrent ValueProposed Value
Reserve Factor45%95%
Borrowing EnabledYesNo
Base Rate0%3%
Slope112%15%
Slope275%200%
UOptimal80%20%

GUSD

ParameterCurrent ValueProposed Value
Reserve Factor45%95%
Borrowing EnabledYesNo
Base Rate0%3%
Slope112%15%
Slope2150%200%
UOptimal70%20%

LUSD

ParameterCurrent ValueProposed Value
Reserve Factor50%95%
Borrowing EnabledYesNo
Base Rate0%3%
Slope112%15%
Slope275%200%
UOptimal80%20%

FRAX

ParameterCurrent ValueProposed Value
Reserve Factor55%95%
Borrowing EnabledYesNo
Base Rate0%3%
Slope112%15%
Slope2100%200%
UOptimal80%20%

sUSD

ParameterCurrent ValueProposed Value
Reserve Factor55%95%
Borrowing EnabledYesNo
Base Rate0%3%
Slope112%15%
Slope2100%200%
UOptimal80%20%

References

Copyright

Copyright and related rights waived via CC0.

03Mismatch analysis

AIMismatch analysis by Kvorumlow confidenceclaude-sonnet-5
Consistent

The proposal follows Aave's standard governance pattern: a single top-level action that calls execute() on a payload contract, which internally performs the detailed reserve configuration changes (reserve factor, interest rate curve parameters, freeze, and disabling borrowing) for USDP, GUSD, LUSD, FRAX, and sUSD as described in the specification tables. The decoded calldata only exposes this single execute() call and does not unpack the internal logic of the payload contract, so it is not possible to directly verify each specific numeric parameter (95% reserve factor, 3% base rate, 15% slope1, 200% slope2, 20% UOptimal) against on-chain values from this data alone. This is consistent with typical Aave V2/V3 payload proposals, where the linked implementation contract (referenced in the description) contains the actual parameter-setting code. Given the lack of granular calldata detail, I cannot confirm or deny discrepancies in the specific values, but there is no evidence of a mismatch, unexpected target, or extra/omitted action in what is decodable. Confidence is therefore low, and per guidance this should not be surfaced as a warning-level discrepancy. The overall action target and pattern (payload execution for deprecation) align with the description's stated intent to deprecate these five stablecoins on Aave V2.'

Generated by Kvorum
model: claude-sonnet-5
provider: anthropic
profile: anthropic-strong-v1
prompt: v1.0
generated: 2mo ago
Review the decoded actions ↗

04Actions

1 total
#0fallback()chain 0x1
Target
0x0456…fb41
Value
0 wei
Function
fallback()
Arguments
{}
Calldata

05Tally

Summed from votes

Voters0
VP participating0
Outcome (current)—
Current support—

06Voters

0 total

No votes recorded yet.

07Forum

No forum thread is confidently linked to this proposal.