Onboard tBTC to Aave v3 on Arbitrum — aave

01Summary

AISummary by Kvorumclaude-haiku-4-5

Onboard tBTC (Threshold's decentralized Bitcoin bridge) as a collateral asset on Aave v3 Arbitrum, following successful adoption on Aave v3 Ethereum. tBTC reached its 2200 BTC supply cap on Ethereum within weeks, demonstrating strong market demand. Risk parameters include 50 tBTC supply cap, 73% LTV, borrowing disabled, and Chainlink BTC/USD oracle pricing.

Type: protocol addition

Key changes

Add tBTC as collateral asset on Aave v3 Arbitrum with 50 tBTC supply cap and 25 tBTC borrow cap(high)
Set LTV at 73% and liquidation threshold at 78% for tBTC collateral(high)
Enable flashloans for tBTC while disabling borrowing functionality(medium)
Use Chainlink BTC/USD oracle for tBTC pricing with 20% reserve factor(high)
Designate 0xac140648435d03f784879cd789130F22Ef588Fcd as emission admin for tBTC and aToken(medium)

Notable concerns

Borrowing is disabled (0% base rate, borrow cap set but borrowable disabled) limiting certain use cases
Relatively conservative 50 tBTC supply cap may not meet demand if Arbitrum adoption mirrors Ethereum's rapid uptake
Depends on sustained liquidity on Arbitrum GMX for liquidation support

ContractsAaveV3Arbitrum

Generated by Kvorum

model: claude-haiku-4-5

provider: anthropic

profile: anthropic-fast-v1

prompt: v1.0

generated: 2mo ago

Read the description ↗

02Description

427 words

Simple Summary

This proposal seeks to onboard tBTC to Aave v3 on Arbitrum following a successful launch on Mainnet

Motivation

tBTC is Threshold’s decentralized and permissionless bridge to bring BTC to Ethereum, Arbitrum and 6 other chains. Users wishing to utilize their Bitcoin on Ethereum & Arbitrum can use the tBTC decentralized bridge to deposit their Bitcoin into the system and get a minted tBTC token in their EVM wallet.

Threshold Network has brought native minting of tBTC to Arbitrum, is live on GMX and has strong, sticky liquidity to support liquidations.

Following its approval on AAVE V3 Ethereum, tBTC’s initial supply cap was reached within 72 hours, prompting an increase to meet the overwhelming demand and now sits at over 1,000 BTC TVL. This rapid adoption underscores the market’s appetite for trust-minimized BTC solutions in DeFi.

Benefits for Aave

High User Demand, since its initial deployment on Aave’s Ethereum market, tBTC reached its initial 500 BTC supply cap within the first week. The cap has been increased multiple times, now sitting at 2200 BTC, highlighting strong user interest. Something we hope to replicate on Arbitrum.
Easy, direct onboarding of BTC capital via Threshold’s Arbitrum native minting.
A range of lending options for those who wish to earn yield on their BTC.
Preferable yields on tBTC through active incentive participation, boosting Aave protocol use, fees and TVL.

Specification

The table below illustrates the configured risk parameters for tBTC

Parameter	Value
Isolation Mode	false
Borrowable	DISABLED
Collateral Enabled	true
Supply Cap (tBTC)	50
Borrow Cap (tBTC)	25
Debt Ceiling	USD 0
LTV	73 %
LT	78 %
Liquidation Bonus	7.5 %
Liquidation Protocol Fee	10 %
Reserve Factor	20 %
Base Variable Borrow Rate	0 %
Variable Slope 1	4 %
Variable Slope 2	300 %
Uoptimal	45 %
Flashloanable	ENABLED
Siloed Borrowing	DISABLED
Borrowable in Isolation	DISABLED

Oracle details

Additionally 0xac140648435d03f784879cd789130F22Ef588Fcd has been set as the emission admin for tBTC and the corresponding aToken.

References

Copyright

Copyright and related rights waived via CC0.

03Mismatch analysis

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