Add LDO to Ethereum Aave v3
01Summary
Add LDO (Lido DAO governance token) to Aave V3 Ethereum as the first major lending market to list it, enabling borrowing and collateral usage with specified risk parameters including 40% LTV, 50% liquidation threshold, and $7.5M debt ceiling.
- Type
- protocol addition
Key changes
- LDO token added to Aave V3 Ethereum with isolation mode enabled(high)
- LDO configured as borrowable and collateral-enabled with 6M supply cap and 3M borrow cap(high)
- Risk parameters set: 40% LTV, 50% liquidation threshold, 9% liquidation bonus, 20% reserve factor(high)
- Interest rate parameters configured with 7% variable slope1, 300% variable slope2, and 45% optimal utilization(medium)
- Stable borrowing disabled for LDO(medium)
Notable concerns
- LDO concentrated in isolation mode with $7.5M debt ceiling limits exposure
- High liquidation bonus (9%) increases costs for liquidators but protects borrowers less
- Steep slope2 rate (300%) may cause rapid interest rate increases at high utilization
- LDO is volatile asset (governance token) being used as collateral
Generated by Kvorum
02Description
Summary
This publication presents the community with the opportunity to add LDO to the Ethereum V3 Liquidity Pool.
Abstract
LDO would be the first Ethereum liquid staking protocol governance token to be listed on Aave. Aave would benefit from being the first major lending market to list LDO. Users will be able to express various trading views on LDO’s price outlook in the lead up to Shanghai.
This publication uses the parameters provided by Gauntlet and Chaos Labs.
Motivation
Lido is a suite of software protocols that facilitates liquid staking across multiple blockchains. The Lido DAO is a decentralised autonomous organisation. The LDO token is used to vote on the use of the DAO treasury associated with the protocols, research and development, and incentive programs.
The Lido DAO is an Aragon organization. The LDO token was created using an Aragon Minime contract. Since Aragon provides a full end-to-end framework to build DAOs, Lido DAO uses its standard tools.
LDO is a Top 50 token by market cap, currently ranked 31st by Coingecko. Lido Protocol is the largest minter of liquid staked ETH tokens with 5,880,987 ETH staked.
Making LDO available on Aave v3 would make Aave v3 the first major lending market to do so and would benefit from the first mover advantage.
Specification
The parameters shown below are the combined recommendation of Gauntlet and Chaos Labs.
Ticker: LDO
Contract Address: 0x5a98fcbea516cf06857215779fd812ca3bef1b32
Oracle: LDO/ETH/USD: 0xb01e6C9af83879B8e06a092f0DD94309c0D497E4
Oracle Components:
LDO/ETH: 0x4e844125952D32AcdF339BE976c98E22F6F318dB
ETH/USD: 0x5f4eC3Df9cbd43714FE2740f5E3616155c5b8419
| Parameter | Value |
|---|---|
| Isolation Mode | Yes |
| Borrowable | Yes |
| Collateral Enabled | Yes |
| Supply Cap (LDO) | 6,000,000 |
| Borrow Cap (LDO) | 3,000,000 |
| Debt Ceiling | $7,500,000 |
| LTV | 40.00% |
| LT | 50.00% |
| Liquidation Bonus | 9.00% |
| Liquidation Protocol Fee | 10.00% |
| Variable Base | 0.00% |
| Variable Slope1 | 7.00% |
| Variable Slope2 | 300.00% |
| Stable Slope1 | 13.00% |
| Stable Slope2 | 300% |
| Uoptimal | 45.00% |
| Reserve Factor | 20.00% |
| Stable Borrowing | Disabled |
Implementation
Test cases can be found here
Payload implementation can be found here
Deployed Payload can be found here
Copyright
Copyright and related rights waived via CC0.
03Mismatch analysis
The proposal is a standard Aave governance listing proposal. The decoded on-chain action is a single call to execute() on a payload contract, which is the typical pattern for Aave V3 governance: the actual listing logic (asset configuration, oracle wiring, risk parameters) is encoded inside the payload contract's bytecode rather than being visible as decoded calldata arguments in this action list. Critically, the target address of the single action (0x7b766a02eba6d8651eeebdeb886323fc64bf1739) exactly matches the 'Deployed Payload' address explicitly linked in the proposal's Implementation section, giving strong confirmation that the calldata executes the same payload the description references. Because the specific numeric parameters (LTV, LT, caps, rates, oracle addresses) are not individually decoded in the calldata provided, they cannot be independently verified line-by-line against the prose table; however, this is expected behavior for this proposal type (execute() wrapping a fixed, audited payload) rather than evidence of tampering. No contradictory, missing, or extra top-level actions are apparent, and the single action's target aligns with the description. Given the opacity of the payload's internal logic, confidence is medium rather than high, but there is no indication of a mismatch, and this pattern is routine for the Aave governance ecosystem.","discrepancies":[]}]}}
Generated by Kvorum
04Actions
- Target
- 0x7b76…1739
- Value
- 0 wei
- Function
- fallback()
- Arguments
{}- Calldata
05Tally
Summed from votes
06Voters
No votes recorded yet.
07Forum
- ARFC: Add support for LDO on Ethereum v3 ↗discourse · high confidence
Arguments for
- Listing LDO would make Aave the first major lending market to support it, providing a first-mover advantage.— jbeezy
- Adding LDO to Aave gives custody-platform users and others who cannot participate in on-chain governance a way to engage with LDO via DeFi (e.g., lending/borrowing), potentially as a step toward future utility like aLDO voting.— jbeezy
- LDO has strong fundamentals as a top-50 token by market cap, sizable trading volume, an existing (if small) lending market on Euler, and a large, active community.— jbeezy
- Risk teams concluded that with isolation mode, conservative supply/borrow caps, and a modest debt ceiling, LDO can be listed safely despite its volatility.— Pauljlei, ChaosLabs
- The Snapshot vote for the proposal passed with an overwhelming YAE result, indicating strong community support.— Llamaxyz
Arguments against
- LDO is purely a governance token with no clear intrinsic use case as collateral or borrowable asset on Aave.— MarcZeller
- LDO's price is unusually tied to Shanghai upgrade sentiment, and any unforeseen issues with stETH redemptions could trigger a sharp LDO sell-off, undermining its quality as collateral.— Pauljlei, ChaosLabs
- LDO has a relatively low market cap and trading volume, making it susceptible to price manipulation and profitable attack vectors if caps are not conservative.— ChaosLabs
- Since Aave already has significant stETH exposure to Lido, adding LDO increases third-party exposure to the Lido ecosystem, and borrowed LDO could theoretically be used to influence Lido DAO governance votes affecting stETH.— ChaosLabs
Unresolved concerns
- The core question of what practical use case LDO serves on Aave (beyond speculative trading) was raised by MarcZeller and only partially addressed by jbeezy pointing to future, undeveloped functionality.— MarcZeller, jbeezy
- ChaosLabs flagged that any amount of borrowed LDO could impact Lido DAO governance votes, and suggested an extreme option of disabling borrowing entirely, but this was not adopted or further debated.— ChaosLabs
Notable participants
- jbeezyProposer from Lido DAO who authored the proposal and responded to community questions about LDO's use case and risk.
- MarcZellerACI representative who questioned the use case for LDO on Aave and conditioned ACI support on community sentiment.
- PauljleiPresented Gauntlet's risk analysis and recommended conservative risk parameters tied to Shanghai upgrade volatility.
- ChaosLabsProvided an independent, detailed risk analysis with parameter recommendations, including governance and manipulation risk considerations.
- LlamaxyzFacilitated the Snapshot vote process and reported the overwhelmingly favorable outcome, moving the proposal toward AIP submission.
Generated by Kvorum
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