Add agEUR to Aave V3 on Optimism and Arbitrum

Author: Angle Core Team Forum Post: https://governance.aave.com/t/listing-proposal-add-ageur-on-aave-v3-on-optimism-and-arbitrum/9432

Summary

The purpose of this AIP is to list agEUR, Angle Protocol's decentralized Euro, on Aave V3 on Optimism and Arbitrum.

About Angle

Angle is a decentralized stablecoin protocol designed to be both over-collateralized and capital-efficient.

The protocol has launched agEUR, a Euro stablecoin, which has become the biggest decentralized Euro stablecoin.
The TVL in the Angle Protocol is $81m with 47m agEUR in circulation.

While for some months, agEUR could only be issued on the Ethereum mainnet, it can now be issued natively on Polygon, Optimism, and Arbitrum where users can borrow agEUR against different collateral assets (wETH, wBTC, USDC, OP) in an over-collateralized way (à la Maker).

Borrowing agEUR is not the only way by which agEUR can be minted. The biggest share of agEUR liquidity comes from what we refer to as our Core module. In the Core module, agEUR can be issued at oracle value from USDC, DAI and FRAX. The protocol insures itself against the $/€ change risk by issuing perpetual futures and by relying on the deposits of another type of agent incentivized by the strategies built by the protocol (involving lending to Aave).

About agEUR

agEUR is a supported asset on the V3 on Polygon, and it has been voted to make it a collateral in isolation mode.

So far, there are 900k agEUR circulating on Optimism, and 320k on Arbitrum with almost all the liquidity on DEXes (Velodrome on Optimism and UniswapV3 on Arbitrum) making it an easily liquidable asset.

Besides these liquidity pools, agEUR has deep liquidity on UniswapV3, Sushiswap and Curve on mainnet. As mentioned above, the stablecoin can be minted/burnt at oracle value on mainnet meaning liquidity for it could be theoretically infinite on any chain beyond these liquidity pools.

agEUR smooth cross-chain liquidity is guaranteed by Angle bridge infrastructure which allows to bridge and get the canonical versions of agEUR on different chains. The protocol relies on different bridge providers, with an emphasis on LayerZero. To drastically limit the impact a bridge hack could have on agEUR, the protocol has set up several safety measures (hourly and global limit notably).

Overall, agEUR is an over-collateralized stablecoin (current collateral ratio = 203%) with as a backing mostly liquid USD stablecoins (USDC, DAI and FRAX).

Links

• Official: https://angle.money
• Docs: https://docs.angle.money
• Token Contracts: Mainnet, Polygon, Optimism, Arbitrum. More generally, all Angle related contract addresses can be found here
• Smart contracts/Code: https://github.com/AngleProtocol
• Analytics: https://analytics.angle.money
• App: https://app.angle.money
• Governance forum: https://gov.angle.money
• Dune Analytics Dashboard: https://dune.xyz/SebVentures/Angle-Dashboard

agEUR has a Chainlink feed on Polygon, and it passes all the requirements for feeds on Optimism and Arbitrum. Otherwise, given agEUR consistent and robust peg, Chainlink EUR-USD feed could be used as a starter before they release the agEUR-USD feeds on Optimism and Arbitrum.

Security Considerations and Risk Analysis

Angle Protocol had four different audits which can be found here. It also has a $500k bug bounty on Immunefi.

Angle Protocol is a decentralized stablecoin protocol, it is ruled by the ANGLE token and more generally by the veANGLE token (which went live in January)

Votes by veANGLE holders are implemented by a 4/6 multisig composed of 3 core team members (Guillaume Nervo, Picodes, Pablo Veyrat), Julien Bouteloup, 0xMaki and SebVentures.

agEUR token contracts on the different supported chains are upgradeable and can be upgraded by the multisig described above. Only protocol related contracts have minting rights on this contract, and so there's no multisig or EOA that can directly mint agEUR at the moment.

agEUR has been assessed by Curve Team, report is available here.

Benefits for Aave V3

agEUR is already supported in efficiency mode with other stablecoins on Polygon, which should technically allow people to take leverage on Forex and more easily arb the stablecoin's peg.

On Polygon, the fact that it's going to become a collateral in isolation mode will allow people to long € and short $ through agEUR (and the agEUR liquidity on DEXes).

Onboarding agEUR to Optimism and Arbitrum would provide the same upsides of enabling € shorts and Euro DeFi users to get a yield on their €. It would in addition make these opportunities more easily accessible for a range of DeFi users who care about the security provided by layer 2 solutions and about small transaction fees.

There's no Euro stablecoin listed on Optimism, and having agEUR on Optimism would be a first option for European DeFi users to get a yield on their assets without having to care about the USD/EUR change risk. On Arbitrum, with the EURs stablecoin that is already available there, adding agEUR could be a way to facilitate a Euro efficiency mode (beyond the stablecoin efficiency mode). 

We are working on a Curve pool on Arbitrum to facilitate immediate arbitrages between agEUR and EURs with the efficiency mode.

Overall, it's very likely that Forex on DeFi won't happen on a single chain, and enabling efficiency mode on different chains is a way to make sure that Aave is well positioned for wherever it's going to fully take off.

Risk Parameters

With the liquidity on Optimism and Arbitrum in mind, the following parameters are proposed:

1. V3 Emode EUR stablecoins (if it exists): 97% LTV, 98% liquidation threshold, 10% reserve factor
2. V3 Emode stablecoins: 90% LTV, 95% Liquidation threshold, 10% reserve factor
3. 0% LTV (meaning agEUR is not a collateral in isolation mode)

Protocol Data

Market Data

• Market Cap: €47m circulating, across all chains, market cap = FDV
• 24h Volume: $3m

Social Channels

• Twitter: 25.9k
• Discord: 31.2k

Contracts date of deployments, number of transactions, number of holders for tokens:

On Optimism:

• Date of Deployment: July 4th 2022
• Number of Transactions: 167 and 1883 transfers
• Number of holders for token: 94

On Arbitrum:

• Date of Deployment: July 4th 2022
• Number of Transactions: 86 transfers
• Number of holders for token: 6

Voting Options

YES - add agEUR to Opti+Arbi NO - do nothing