Ethena Proposes Adding sUSDe as Collateral Asset on Aave V3

In a recent development, Ethena, the project behind the USDe stablecoin, has announced a preliminary proposal to integrate sUSDe into the Aave V3 platform.

Proposal Details

The proposal, currently in the form of a Temperature Check (a preliminary opinion poll), was posted on the Aave discussion forum on the evening of March 4th.

USDe is a collateralized stablecoin pegged to the US dollar through a Delta Neutral model. Users who stake USDe receive sUSDe, a certificate token that allows them to earn high yields generated by the protocol.

In the proposal, the Aave Chan Initiative (ACI) and Ethena highlighted that the liquidity of USDe on Curve has surpassed the $100 million mark. Additionally, the high yield from sUSDe is expected to incentivize users to deposit this asset as collateral, subsequently creating a high demand for borrowing.

Risks and Considerations

The authors of the proposal also emphasized potential risks associated with the USDe stablecoin. Key risks include smart contract vulnerabilities, liquidity risks, and risks stemming from centralized exchange platforms.

Despite these concerns, the proposal is currently in the preliminary opinion phase, with a limited loan-to-value (LTV) ratio suggested to mitigate risks. If approved by the community, detailed discussions on the market parameters for sUSDe will follow.

Current Market Status

At the time of writing, the market capitalization of the USDe stablecoin stands at approximately $760 million, with steady growth and no signs of cooling down.

Community Engagement

The proposal has already sparked discussions within the Aave community, with stakeholders considering the potential benefits and drawbacks of integrating sUSDe as a collateral asset. The outcome of this preliminary poll will determine the next steps in the proposal process, potentially leading to a full integration on the Aave V3 platform.