A brand new proposal on Aave suggests hardcoding the worth of Ethena’s USDe to match Tether’s USDt in Aave’s pricing feeds.
The proposal, co-authored by Chaos Labs and LlamaRisk, was submitted on Jan. 3 and seeks to guard Aave customers from publicity to secondary market fluctuations. Notably, LlamaRisk is a part of Ethena’s danger committee. The proposal reads:
“By linking USDe’s worth on to USDt, we align the sUSDe oracle with USDt pricing, making certain seamless integration and avoiding disruptions brought on by transient value fluctuations in USDe.”
Aave (AAVE) is the most important decentralized finance (DeFi) lending protocol, with $37 billion in complete worth locked, permitting customers to borrow and lend cryptocurrencies with out intermediaries. Customers can deposit belongings into Aave’s liquidity swimming pools and earn curiosity or borrow utilizing crypto as collateral.
USDe (USDE), created by Ethena, is an artificial greenback stablecoin backed by onchain belongings and derivatives, in contrast to USDT, which depends on fiat reserves. USDE now ranks because the third-largest stablecoin, with a $5.85 billion market cap, trailing USDt (USDT) and USD Coin (USDC), in line with CoinGecko.
Related: Ethena’s USDe beats DAI to become 3rd-largest stablecoin
Why peg USDE to USDT?
Aave at the moment makes use of Chainlink’s USDe/US greenback value feed to worth staked USDe (sUSDe), a staked model of USDE.
In line with the proposal, a 5% drop in USDE’s value might put over $300 million value of USDE-backed loans on Aave prone to liquidation. This might set off collateral sell-offs to repay excellent debt.
“To mitigate the chance related to a USDe depeg occasion, we suggest hardcoding USDe’s value to USDT,” the authors said.
Neighborhood backlash
The proposal has drawn skepticism from Aave customers, who query whether or not the strategy addresses elementary dangers.
A snippet of group suggestions on Aave’s proposal to hardcode USDE’s value to USDT. Supply: Aave Governance Discussion board.
“Hardcoding the USDe value to USDT value sounds a bit dangerous given USDe isn’t actually supposed to be a stablecoin,” person Hazbobo identified. “What’re the sting case dangers concerned? What’s the worst case situation?”
One other group member, ElliotNess, criticized the proposal for failing to deal with underlying danger elements:
“This can be a disappointingly low-quality ARFC from two service suppliers with out digging into any potential conflicts… Frankly, this may be stated of each non-hardcoded asset listed on the Aave protocol,” they famous.
ElliotNess questioned the rationale behind pegging USDE to USDT, suggesting that if Aave plans to hardcode USDe’s value, it’d as nicely peg it on to $1.00 to keep away from secondary market value deviations totally.
The proposal is in its early dialogue stage, with no formal vote scheduled but.
On the time of publication, AAVE was buying and selling at $340, up 7% up to now 24 hours and 230% over the previous 12 months.
Aave’s growth in 2024 has been pushed by growth into new markets, together with BNB Chain, Scroll, ZKsync Period, and Ether.fi. The protocol can be eyeing additional integrations in 2025, with potential additions like Sonic, Mantle, Ethereum layer 2 Linea, Bitcoin layer 2 BOB, Spider Chain and Aptos, pending group approval.
Ethena’s 2025 roadmap
Ethena (ENA) surged 17% following the release of its 2025 roadmap, detailing plans to combine with Telegram and launch a brand new greenback financial savings product.
The Jan. 3 roadmap introduced iUSDe, a wrapped model of sUSDe, which at the moment gives a ten% yield. Ethena introduced plans to combine sUSDe into Telegram, leveraging its 900 million customers. The combination will introduce a fee and financial savings app based mostly on sUSDe, aiming to ship a “neobank expertise” inside the messaging platform.
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