Aave

[ARFC] Deploy a Lido Aave v3 Instance

Author: ACI (Aave Chan Initiative)

Date: 2024-06-24

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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

1. If the ARFC snapshot outcome is YAE, publish an AIP vote for final deployment and enforcement of the proposal.
2. Work with service providers and Lido Alliance to release and promote the new Aave v3 instance.

Copyright:

Copyright and related rights waived under CC0.