KVORUM
aaveSource: Aave governance v3 · #266

AUSD on V3 Avalanche

executedMar 15, 2025, 11:56 AM UTCby570x57ab…2922

01Summary

AISummary by Kvorumclaude-haiku-4-5

Chaos Labs proposes enabling AUSD stablecoin as collateral on Aave V3 Avalanche with a 69% LTV, 72% liquidation threshold, and 6% liquidation bonus. AUSD's liquidity and peg stability have improved significantly since its November 2024 listing, supporting this change.

Type
parameter change

Key changes

  • Enable AUSD as collateral asset on Aave V3 Avalanche (previously non-collateral)(high)
  • Set LTV (Loan-to-Value) to 69.00% for AUSD collateral(high)
  • Set Liquidation Threshold to 72.00% for AUSD(high)
  • Set Liquidation Bonus to 6.00% for AUSD(medium)

Notable concerns

  • AUSD-AUSD looping is possible, though Merit system provides granular control over loop incentives
  • AUSD market is currently underutilized at 61.29% utilization rate
  • Enabling AUSD collateral could increase stablecoin borrowing arbitrage
  • AUSD has relatively limited operational history compared to more established stablecoins
ContractsAaveV3Avalanche
Generated by Kvorum
model: claude-haiku-4-5
provider: anthropic
profile: anthropic-fast-v1
prompt: v1.0
generated: 2mo ago
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02Description

364 words

Simple Summary

Chaos Labs recommends making AUSD into a collateral asset on Aave V3’s Avalanche Deployment.

Motivation

AUSD is a stablecoin native to Avalanche; in November 2024, we provided a detailed recommendation for listing for the asset. At the time, we stated that, because “stablecoins on Aave typically show little demand as collateral due to their primary role as borrowable assets, we recommend setting AUSD as non-collateral. This aligns with AUSD’s relatively volatile liquidity profile and limited operational history.”

We now have a greater historical record on which to judge the asset and its suitability as collateral, especially its liquidity profile. The asset’s liquidity has been steadily growing since October 2024, currently pooled against about $10M worth of USDC and USDT.

Additionally, AUSD’s peg stability has improved, with just 1.56% daily annualized volatility over the last 30 days.

AUSD Usage on Aave

The AUSD market is currently slightly underutilized, with a utilization rate of 61.29%.

Borrows of the asset have fallen slightly from their peak, while the supply has remained relatively stable. Supplying is currently incentivized, with an 8.24% asAVAX APR.

BTC.b has consistently been the most popular collateral asset for AUSD debt, followed by USDC.

Elsewhere on Avalanche, borrow rates for stablecoins have been following. Given the current incentives, allowing AUSD as collateral could increase borrowing of other stablecoins, as users seek to arbitrage their rates.

While AUSD-AUSD looping is possible and has been observed on other protocols, the implementation of Merit provides the protocol with more granular control over rewards, allowing the DAO to limit the incentives that can be obtained through looping.

LB, LTV, and LT

We recommend a Liquidation Bonus of 6.00% for AUSD, aligning with other, smaller stablecoins like FRAX on Arbitrum. Taking this larger LB into account, we recommend an LT of 72.00% and an LTV of 69.00%.

Specification

ParameterValue
AssetAUSD
Liquidation Bonus6.00%
LTV69.00%
Liquidation Threshold72.00%

References

Copyright

Copyright and related rights waived via CC0.

03Mismatch analysis

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04Actions

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05Tally

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06Voters

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07Forum

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