[ARFC] Aave V3 Deployment on Celo

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Title: [ARFC] Aave V3 Deployment on Celo Date: 2024-05-09 Author: @pennblockchain, @Isha - Isha Varshney (Celo Foundation)

Summary:

This ARFC proposes the deployment of Aave on Celo to expand Aave real-world lending and green asset collateral to users around the world, with the provision of rewards to bootstrap liquidity.

Abstract:

Upon approval by the Aave community, Aave will be deployed on Celo with a selection of suitable assets for collateral, including CELO, USDC, USDT, cUSD and cEUR. This deployment aims to enhance the growth and collaboration between the Aave and Celo communities, providing new opportunities for both ecosystems. This deployment will be incentivized by the tune of $3M over 3 years (with option to extend) by Celo Foundation directly or through ecosystem partners.

Motivation:

Deploying Aave on Celo presents potential benefits for both Aave and Celo ecosystems. The Celo ecosystem offers a unique value proposition featuring real-world usage and ReFi. As Aave will be given a prominent role on Celo, this deployment offers Aave differentiated expansion and revenue opportunities. For more details on Celo’s real-world usage and key features, please refer to the temp check.

1. A deployment on Celo expands AAVE’s utility and user base to a unique population of Celo’s mobile-first community which has grown significantly 2 over the past few months led by key launches that have brought in returning real-world users in emerging markets.
2. Aave will be heavily utilized for real-world DeFi and ReFi use cases, particularly in emerging markets given Celo’s growing presence in these regions led by protocols like GoodDollar, Impact Market and the Opera Minipay wallet.
3. The Celo Foundation directly or through ecosystem partners will allocate $3M over 3 years (with option to extend) as well as the option for Retroactive Public Goods Funding as an incentive for Aave users to support the adoption and bootstrap growth on Celo. This deployment will bring new users to the Aave platform and reach more users from the Celo community.
4. The Mento protocol on Celo proposed returning 120M CELO to the Celo Community Fund, which the Celo community has expressed interest in placing in Aave to boost on-chain liquidity for CELO (pending a governance process). More details here 3.
5. In the long-term, this Celo x AAVE deployment has the potential opportunity to expand into RWA tokens, natural capital-backed assets such as tokenized carbon credit and other ReFi assets (conditional upon rigorous liquidity and credit assessments by Chaos Labs and others) etc.

Specification:

The ARFC suggests deploying Aave on Celo with the following assets for collateral: CELO, USDC, USDT, cUSD and cEUR.

The table below combines both risk managers’ suggested risk parameters for each asset previously submitted. The highlighted values are Gauntlet’s more liberal recommendations. Over time, we expect we can continue to increase caps as the Celo blockchain grows through the development of more real-world use cases and the transition to an L2 on Ethereum.

Risk Parameters	WETH	USDC	CELO	cUSD
Isolation Mode	NO	NO	NO	YES
Enable Borrow	YES	YES	YES	YES
Enable Collateral	YES	YES	NO	YES
Emode Category	N/A	N/A	N/A	N/A
Loan To Value	80%	75%	N/A	70%
Liquidation Threshold	82.5%	80%	N/A	75%
Liquidation Bonus	5%	5%	N/A	5%
Reserve Factor	15%	10%	15%	10%
Liquidation Protocol Fee	10%	10%	10%	10%
Borrow Cap	300	2,000,000	1,000,000	3,400,000
Supply Cap	300	2,000,000	1,000,000	4,300,000
Debt Ceiling	N/A	N/A	N/A	TBD
uOptimal	80%	80%	45%	75%
Base	1%	0%	0%	0%
Slope1	3.8%	4%	7%	5%
Slope2	80%	60%	300%	75%
Stable Borrowing	Disabled	Disabled	Disabled	Disabled
Stable Slope1	13.00%	13.00%	13.00%	13.00%
Stable Slope2	300.00%	300.00%	300.00%	300.00%
Base Stable Rate Offset	3.00%	3.00%	3.00%	3.00%
Stable Rate Excess Offset	5.00%	5.00%	5.00%	5.00%
Optimal Stable To Total Debt Ratio	20.00%	20.00%	20.00%	20.00%
Flashloanable	YES	YES	YES	YES
Siloed Borrowing	NO	NO	NO	NO
Borrowed in Isolation	NO	YES	NO	NO

Deployment Checklist:

• Feedback from both risk service providers
• BGD Labs Infrastructure/technical evaluation Report
• Oracle recommendation:
• The graph support
• Cross-chain messaging infrastructure for governance

Disclaimer

Franklin DAO is not compensated in any form by Celo or creating this ARFC proposal. This ARFC has been prepared solely to facilitate community discussion. At the time of writing, the author has been delegated $0 worth of assets on the Celo chain.

Next Steps

1. Refine the ARFC based on community feedback and risk service provider recommendations.
2. If consensus is reached and the proposal is refined, submit the ARFC for a snapshot vote for final approval.
3. If consensus is reached, submit a deployment AIP to activate Aave on Celo.

Copyright

Copyright and related rights waived via CC0.