Summary

This publication presents the community with the opportunity to add LUSD to Aave Arbitrum v3.

Abstract

LUSD is decentralised stable coin backed by ETH that is minted on the non-custodial, immutable, and governance-free, Liquidity Protocol.

Adding LUSD to Arbitrum will promote stable coin diversity. All Liquidity Protocol contracts are immutable, which makes LUSD the most trustless stablecoin available.

This publication proposes listing LUSD with collateral disabled (LTV 0%) with borrowing enabled.

Motivation

LUSD is currently listed on the following Aave deployments:

• Ethereum V3
• Ethereum V2
• Optimism V3

This publication seeks to list LUSD on Aave v3 Arbitrum.

Past publications, which can be found here and here, provide insight and context.

LUSD brings more stable coin diversity to the Aave Protocol and will further empower the support for decentralized stablecoins. The LUSD stable coin mechanism is relatively simple and is in line with the risk averse ethos of the Aave Community.

LUSD is overcollateralised by ETH with two main mechanisms helping it keep its peg:

• LUSD can be redeemed for ETH at face value (i.e., 1 LUSD for $1 of ETH).
• Minimal collateral ratio of 110%.

Both mechanisms respectively create a price floor and ceiling through arbitrage opportunities.

LUSD on Arbitrum and Optimism relies on users transferring LUSD through each networks respective bridge to arbitrage the price variation across the networks.

This proposal aims to add LUSD as a borrowable asset (LTV 0%).

Specification

The parameters shown below are the combined recommendation of Gauntlet and Chaos Labs.

Ticker: LUSD

Contract Address: 0x93b346b6BC2548dA6A1E7d98E9a421B42541425b

Chainlink Oracle LUSD/USD 0x0411D28c94d85A36bC72Cb0f875dfA8371D8fFfF

Parameter	Value
Isolation Mode	No
Borrowable	Yes
Collateral Enabled	No
Supply Cap	900,000 units
Borrow Cap	900,000 units
Debt Ceiling	0
LTV	NA
LT	NA
Liquidation Bonus	NA
Liquidation Protocol Fee	NA
Variable Base	0.00%
Variable Slope1	4.00%
Variable Slope2	87.00%
Uoptimal	80.00
Reserve Factor	10.00%
Stable Borrowing	Disabled
Stable Slope1	4.00%
Stable Slope2	87.00%
Base Stable Rate Offset	1.00%
Stable Rate Excess Offset	8.00%
Optimal Stable To Total Debt Ratio	20.00%

Implementation

A list of relevant links like for this proposal:

• Governance Forum Discussion
• Test Cases
• Payload Implementation

The proposal Payload was reviewed by Bored Ghost Developing.

Disclaimer

@llamaxyz and contributor, @TokenLogic, are not associated with or compensated by Liquity for publishing this AFRC.

Copyright

Copyright and related rights waived via CC0.