KVORUM
aaveSource: Aave governance v3 · #225

Proposal to Remove USDS from sUSDe Liquid E-Mode in Aave Prime Instance

executedJan 4, 2025, 12:19 PM UTCby570x57ab…2922

01Summary

AISummary by Kvorumclaude-haiku-4-5

This proposal removes USDS from the sUSDe Liquid E-Mode in Aave Prime instance to mitigate risks from elevated borrow rates and potential liquidity mismatches, while increasing the liquidation bonus from 3% to 4% on sUSDe E-Mode across both Prime and Core instances. Existing positions are unaffected, but new USDS borrowing in this E-Mode will be prevented.

Type
parameter change

Key changes

  • Remove USDS from sUSDe Liquid E-Mode in Aave Prime instance(high)
  • Increase liquidation bonus from 3% to 4% on sUSDe E-Mode on both Prime and Core instances(high)
  • Update E-Mode configuration to reflect USDS removal and align with risk management framework(medium)

Notable concerns

  • Recent market observations indicate increased borrow rates and potential liquidity mismatches involving USDS in the sUSDe Liquid E-Mode
  • USDS remains the primary collateral exposure in Prime instance until a wrapper becomes available for isolation
  • Changes prevent new positions from being established with USDS in this E-Mode, though existing positions remain unaffected
ContractsAaveV3EthereumAaveV3EthereumLido
Generated by Kvorum
model: claude-haiku-4-5
provider: anthropic
profile: anthropic-fast-v1
prompt: v1.0
generated: 2mo ago
Read the description ↗

02Description

323 words

Simple Summary

This proposal recommends the removal of USDS from the sUSDe Liquid E-Mode in the Aave Prime instance.

Motivation

The sUSDe Liquid E-Mode was introduced to enhance capital efficiency for users by allowing higher loan-to-value (LTV) ratios when using sUSDe as collateral to borrow stablecoins like USDS. See this proposal for more context.

However, recent market observations have indicated increased borrow rates and potential liquidity mismatches involving USDS within this E-Mode. To address these concerns, this proposal suggests temporarily removing USDS from the sUSDe Liquid E-Mode in the Aave Prime instance.

The primary motivations for this proposal are:

  1. Risk Mitigation: The inclusion of USDS in the sUSDe Liquid E-Mode has led to elevated borrow rates and potential liquidity mismatches.
  2. Collateral Isolation: Until a wrapper is available to isolate USDS collateral in the Prime instance, USDS remains the primary exposure. Removing it from the sUSDe Liquid E-Mode will help manage associated risks more effectively.
  3. User Impact: This change will not negatively impact existing user positions but will prevent the establishment of new ones involving USDS in the sUSDe Liquid E-Mode, thereby safeguarding current users while mitigating potential future risks.

Specification

The proposed changes are as follows:

  • Asset Removal: Exclude USDS from the sUSDe Liquid E-Mode in the Aave Prime instance.
  • Parameter Adjustments: Update the E-Mode configuration to reflect the removal of USDS, ensuring alignment with the protocol’s risk management framework.
  • Liquidation buffer improvement: echoing concerns from @LlamaRisk and other service providers, sUSDe emode on both Prime & Core instances are set to increase their buffer for liquidations.
    • Increase Liquidation Bonus from 3 to 4% on e-modes on Core and Prime instances.

Current ARFC will be reviewed by Risk Service Providers and their feedback will be included in the current ARFC.

References

Copyright

Copyright and related rights waived via CC0.

03Mismatch analysis

AIMismatch analysis by Kvorum

A calldata-vs-description analysis is not generated yet. Review the decoded actions →

04Actions

2 total
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#1fallback()chain 0x1
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05Tally

Summed from votes

Voters0
VP participating0
Outcome (current)—
Current support—

06Voters

0 total

No votes recorded yet.

07Forum

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