2025-03-10: This post was edited to reflect @LlamaRisk and @ChaosLabs parameters recommendations. When they differ, the most conservative one was selected.

Summary

This publication proposes changes in the Gnosis Chain instance to improve the capital efficiency of USDC.e and sDAI assets by promoting changes on its parametrisation.

Motivation

The Gnosis Chain’s DeFi landscape has evolved considerably since these assets were first introduced. With a vibrant ecosystem now in place, it’s time to enhance capital efficiency, reduce capital fragmentation, and create useful debt vs no risk looping within the Aave GC instance to attract more capital and increase utilisation.

USDC to USDC.e Transition:

Gnosis Chain is committed to making USDC.e (the version that aligns with Circle’s standards) the defacto version of this stablecoin within its ecosystem, by accelerating the transition from USDC and making it the major market within Aave’s GC instance (replacing xDAI). To incentivise this migration and accommodate increased capital inflows, we propose the following adjustments for USDC.e:

• Supply and Borrowing Cap Increase: Enacted via the Risk Steward.
• Emode Creation: Establish an Emode pairing between USDC.e and sDAI, similar to the existing sDAI/EURe Emode.

Those changes will incentivise looping strategies with USDC.e similar to those with EURe/xDAI.

To further promote the transition to USDC.e, we propose reducing the LTV factor for USDC. This measure will prevent the initiation of new borrowings using USDC, thus encouraging users to adopt USDC.e.

sDAI Borrowability

This proposal also asks to make sDAI a borrowable asset. There is little justification for depositing xDAI into Aave on Gnosis, as sDAI offers the same risk profile. The optimal configuration, then, would be to phase out xDAI in favour of sDAI (this will be presented in a future proposal). sDAI becoming borrowable ensures a more efficient and market-driven borrowing system on the platform.

Specification

The tables below show the current and proposed parameters for each asset. A subsequent AIP will be submitted to implement these changes upon implementing this proposal.

• USDC.e

Parameters	Current	Proposed
Isolation Mode	No	No
Borrowable in Isolation	Yes	Yes
Enable Borrow	Yes	Yes
Enable Collateral	Yes	Yes
Loan To Value (LTV)	75%	75%
Liquidation Threshold	78%	78%
Liquidation Bonus	5%	5%
Reserve Factor	10%	10%
Liquidation Protocol Fee	10%	10%
Supply Cap	10M	10M
Borrow Cap	9M	9M
Debt Ceiling	N/A	N/A
Optimal	90%	90%
Base	0%	0%
Slope1	9.5%	9.5%
Slope2	40%	40%
Emode	No	Yes

• Create sDAI/USDC.e E-mode

Parameters	Value	Value
Asset	sDAI	USDC.e
Collateral	Yes	No
Borrowable	No	Yes
Max LTV	90%	90%
Liquidation Threshold	92%
Liquidation Bonus	4%

• USDC

Parameters	Current	Proposed
Supply Cap	11m	2m
Borrow Cap	11m	2.5m
Reserve Factor	25%	40%
LTV	75%	65%

• sDAI

Parameters	Current	Proposed
Isolation Mode	No	No
Borrowable in Isolation	Yes	Yes
Enable Borrow	Yes	Yes
Enable Collateral	Yes	Yes
Loan To Value (LTV)	75%	75%
Liquidation Threshold	78%	78%
Liquidation Bonus	5%	5%
Reserve Factor	10%	10%
Liquidation Protocol Fee	20%	20%
Supply Cap	48M	48M
Borrow Cap	0	4M
Debt Ceiling	N/A	N/A
Optimal	90%	90%
Base	0%	0%
Slope1	4%	4%
Slope2	75%	20%
Emode	No	Yes

Disclosure

karpatkey has not received payment for this proposal. karpatkey is a delegate within the Aave community.

Next Steps

1. Gather feedback from the community and Service Providers.
2. If consensus is reached on this ARFC, escalate this proposal to the Snapshot stage.
3. If Snapshot outcome is YAE, escalate this proposal to AIP stage

Copyright

Copyright and related rights waived via CC0.