[ARFC] Deploy a Lido Aave v3 Instance
Author: ACI (Aave Chan Initiative)
Date: 2024-06-24
Summary
This proposal suggests joining the Lido Alliance as the Aave DAO and deploying an Aave v3 instance focused on the Lido ecosystem.
Motivation
Aave and Lido have historically seen symbiotic growth, with stETH being one of the premier collaterals on Aave and leveraged staking being one of the most profitable use cases for both Aave DAO and Lido users.
Lido is in the process of launching the Lido Alliance, which will reward novel use cases of staked ETH and support further growth of the Lido ecosystem. This ARFC proposal suggests that Aave supports Lido Alliance efforts by deploying a new Aave V3 ETH market for Lido. This Aave v3 instance will be designed and tuned to support stETH leverage loopers. The deployment will only include wstETH and wETH assets with E-Mode enabled.
Lido has committed incentive programs and ecosystem support for this instance in order to bootstrap liquidity and promote additional programs within the Lido Alliance.
This market will be bootstrapped with wETH from the Ahab program to attract wETH liquidity.
wETH suppliers will also be proposed to be eligible to a dedicated Merit Boost
Incentives from Lido will be detailed ahead of the AIP deployment.
Specification
The Lido Alliance’s Aave v3 instance implements the following:
- The borrow cap of wETH will be set to 90% of supplied wETH, with updates tightly controlled by the risk steward. This will ensure that stETH/wETH loops are consistently profitable and can't go into negative territory.
- E-Mode LTV & LT are set 50 bps above all other Aave implementations, making it the most efficient loop venue in the industry.
- For the first 6 months of the Lido Alliance Aave v3, wETH slope1 will be set at 2.50%, ((currently 2.7% on mainnet and on L2s) and wETH RF set at 10% (currently 15% on all markets). This will make it the most profitable venue to loop stETH & wETH.
- wstETH RF will be 5%.
The deployment of the Aave V3 Lido Ecosystem Aave will be done by Catapulta on behalf of the Aave DAO.
| Parameter | wstETH value | wETH value |
|---|---|---|
| Isolation Mode | No | No |
| Borrowable | Yes | Yes |
| Collateral Enabled | Yes | Yes |
| Supply Cap | 650K | 900K |
| Borrow Cap | 12k | 810K |
| Debt Ceiling | NA | NA |
| LTV | 80.00% | 82.00% |
| LT | 81.00% | 83.00% |
| Liquidation Bonus | 6% | 5% |
| Liquidation Protocol Fee | 10.00% | 10.00% |
| Variable Base | 0.0% | 0.0% |
| Variable Slope1 | 3.5% | 2.50% |
| Variable Slope2 | 85% | 85% |
| Uoptimal | 45% | 90% |
| Reserve Factor | 5.00% | 10% |
| Stable Borrowing | Disabled | Disabled |
| Flahloanable | Yes | Yes |
| Siloed Borrowing | No | No |
| Borrowed in Isolation | No | No |
| E-Mode | Yes | Yes |
| E-Mode LTV | 93.5% | 93.5% |
| E-Mode LT | 95.5% | 95.5% |
| E-mode Liquidation Bonus | 1% | 1 % |
Useful Links:
Lido Alliance proposal: https://research.lido.fi/t/lido-alliance-an-ethereum-aligned-ecosystem/7475
https://governance.aave.com/t/temp-check-deploy-a-lido-aave-v3-instance/17930
Disclaimer:
The Aave Chan Initiative is not directly affiliated with Lido and did not receive compensation for creating this proposal. The ACI and its employees hold stETH.
Next Steps
- If the ARFC snapshot outcome is YAE, publish an AIP vote for final deployment and enforcement of the proposal.
- Work with service providers and Lido Alliance to release and promote the new Aave v3 instance.
Copyright:
Copyright and related rights waived under CC0.
Off-Chain Vote
YAE
674.7K AAVE99.9%
NAY
81.95 AAVE0%
ABSTAIN
500.21 AAVE0.1%
Discussion
Timeline
Jul 02, 2024Proposal created
Jul 03, 2024Proposal vote started
Jul 06, 2024Proposal vote ended
Feb 15, 2026Proposal updated