stablecoin harmonization
01Summary
This AIP proposes consolidating stablecoin collateral around USDT and USDC by setting LTV to zero for alternative stablecoins and low-traction assets, adjusting reserve factors across asset types, and gradually offboarding underutilized collaterals like FRAX, LUSD, KNC, STG, and FXS across multiple Aave V3 networks.
- Type
- parameter change
Key changes
- Set LTV to zero for alternative stablecoins and long-tail assets while maintaining USDT and USDC as primary stablecoin collaterals(high)
- Implement 3%/week LT reduction for alternative stablecoins to provide transition period for users(high)
- Adjust standardized reserve factors: wETH 15%, USDC/USDT 10%, alternative stablecoins & long-tail 20%, DAI 25%(high)
- Fade out FRAX, LUSD, EURS (except Polygon), agEUR, JEUR, and MAI as collateral(high)
- Gradually offboard KNC, STG, FXS (Ethereum) and WBTC.e (Avalanche) by freezing, increasing RF to 99.9%, and decreasing LT by 3% weekly(high)
Notable concerns
- Users holding alternative stablecoins as collateral will face reduced LTV and eventual inability to use them for borrowing
- Asymmetric risk from stablecoins highlighted as concern, referencing CRV event with USDC collateral
- Current low utilization of DAI, USDT, and USDC as collateral (2.4-5.8% on Ethereum) suggests consolidation may have limited disruption but concentration risk increases
- Some assets like KNC generate minimal revenue ($0.79 borrow volume) and negligible usage
Generated by Kvorum
02Description
Simple Summary
This AIP proposes focusing stablecoin collateral usage on USDT and USDC while setting LTV to zero for less-trafficked stablecoins and long-tail assets. The objective is to minimize risk for the protocol, optimize revenue generation, and align with market demand trends.
Motivation
Aave’s revenue primarily comes from wETH borrowing and stablecoins borrowing. Years of User behavior data in DeFi indicates a low demand for fluctuating assets as collateral except in use-case-specific scenarios (LST/LRT loops for Weth, RPL borrow to deploy mini pools). Based on @ChaosLabs data , only 2.4%, 3.7%, and 5.8% of supplied DAI, USDT, and USDC on Ethereum are being utilized as collateral. We can also note that market demand for alternative stablecoins is less sensitive to borrow rates compared to blue-chip stablecoins like USDT and USDC.
The DAO governance has been lenient in onboarding some collaterals, such as KNC, which currently attracts nearly zero traction (currently used to generate 0.79$ of borrow volume) and generates minimal revenue. Additionally, the asymmetric risk presented by stablecoins, such as during the CRV event (collateral was USDC with very high LT and low LB), highlights the need for optimization considering Risk/reward.
Specification
The ACI proposes the following strategy shift:
- Focus on USDT and USDC as primary stablecoin collaterals.
- Set LTV to zero for alternative stablecoins and long tail assets.
- Enable a 3%/week LT reduction for these stablecoins assets, providing ample time for users to react and keep them as passive yield sources or borrowable assets that represent 99% of current user demand and most of protocol revenue.
- Propose the following adjusted standardized ReserveFactor categories for Aave assets:
| Collateral Type | Reserve Factor % |
|---|---|
| wETH | 15% |
| USDC/USDT | 10% |
| Alternative stablecoins & long tail assets | 20% |
| DAI | 25% |
note: except for MAI that is currently 95% RF
- Fade out as collateral the following stablecoins:
- FRAX
- LUSD
- EURS (except Polygon)
- agEUR
- JEUR
- MAI
- freeze (if not already), then slowly offboard the following alternative stablecoins and long-tail assets that failed to gain traction by gradually increasing RF to 99.9%, decreasing LT by 3% per week then applying incremental interestRateStrategies incentivizing users to switch to others collaterals or borrowed asset as the DAO implemented for BUSD and TUSD on Aave V2:
| Collateral Type | Network |
|---|---|
| agEUR | All pools |
| JEUR | All pools |
| MAI | All pools |
| KNC | Ethereum |
| STG | Ethereum |
| FXS | Ethereum |
| WBTC.e | Avalanche |
References
- Implementation: AaveV3Ethereum, AaveV3Polygon, AaveV3Avalanche, AaveV3Optimism, AaveV3Arbitrum, AaveV3Metis, AaveV3Gnosis
- Tests: AaveV3Ethereum, AaveV3Polygon, AaveV3Avalanche, AaveV3Optimism, AaveV3Arbitrum, AaveV3Metis, AaveV3Gnosis
- Snapshot
- Discussion
Copyright
Copyright and related rights waived via CC0.
03Mismatch analysis
The proposal description lays out a detailed, multi-part strategy (LTV=0 for alt-stablecoins, weekly LT reductions, new Reserve Factor tiers, freezing/offboarding several long-tail assets). However, the decoded on-chain action set contains only a single generic execute() call to a payload contract address, with no internal calldata decoded. This is the standard pattern for Aave governance proposals, where the specific reserve-configuration changes (setLtv, setLiquidationThreshold, setReserveFactor, freezeReserve, etc.) are encoded inside the target payload contract's bytecode and are not exposed in this top-level decoded action. Because none of the granular parameter changes described in the prose are visible in the decoded calldata, I cannot directly verify whether the numbers (10%/15%/20%/25% RF, 3%/week LT reduction, LTV=0, 99.9% RF for offboarded assets) match on-chain values, nor can I confirm the exact list of affected assets. There is no evidence of contradiction — the single execute() call is consistent with running the payload described in the linked implementation contracts — but the lack of decoded internal detail means confidence in a full match is low rather than a real discrepancy. No claims in the description are contradicted by what is visible in the calldata, and no unexplained actions appear in the calldata beyond the expected payload execution, so I do not flag any discrepancies. This assessment should be treated as an opaque-execute() case rather than a verified match, and is recorded as low confidence per guidance to avoid raising unwarranted alarms based on data we cannot see.
Generated by Kvorum
04Actions
- Target
- 0xf5a4…3d2c
- Value
- 0 wei
- Function
- fallback()
- Arguments
{}- Calldata
05Tally
Summed from votes
06Voters
No votes recorded yet.
07Forum
No forum thread is confidently linked to this proposal.
08Similar proposals
- aaveexecutedStablecoinIRUpdates86%
- aaveexecutedStablecoin IR Curve Amendment86%
- aaveexecutedConfiguration maintenance86%
- aaveexecutedStablecoin IR Curve Amendment86%
- aaveexecutedGeneralized LT/LTV Reduction on Aave86%
- aaveexecutedStablecoinIRUpdates85%
- aaveexecutedRemove USDS as collateral and increase RF across all Aave Instances85%
- aaveexecutedAave V2 Deprecation Update85%
- aaveexecutedGeneralized LT/LTV Reductions on Aave V3 Step 283%
- aaveexecutedHarmonize USDT Risk Parameters on Aave V3 Markets83%