A new proposal for Aave suggests hardcoding Ethena’s USDe price to match Tether’s USDt in Aave’s price feed.
The proposal, co-authored by Chaos Labs and LlamaRisk, was submitted on January 3 and is intended to protect Aave users from exposure to secondary market fluctuations. In particular, LlamaRisk is part of Ethena’s Risk Council. The suggestions are as follows:
“By tying the value of USDe directly to USDt, we align the sUSDe oracle with the USDt price, ensuring seamless integration and preventing disruption due to temporary price fluctuations in USDe.”
Aave (AAVE) is the largest decentralized finance (DeFi) lending protocol, with a total value of $37 billion, allowing users to borrow and lend cryptocurrencies without intermediaries. Users can deposit assets into Aave’s liquidity pool and use cryptocurrencies as collateral to earn interest or borrow.
USDe (USDE), created by Ethena, is a synthetic dollar stablecoin based on on-chain assets and derivatives, unlike USDT, which relies on fiat reserves. According to CoinGecko, USDE is currently ranked as the third-largest stablecoin with a market capitalization of $5.85 billion, behind USDt (USDT) and USD Coin (USDC).
Related: Ethena’s USDe Surpasses DAI to Become 3rd Largest Stablecoin
Why peg USDE to USDT?
Aave currently uses Chainlink’s USDe/USDe price feed to value staked USDe (sUSDe), the staked version of USDE.
According to the proposal, a 5% decline in the price of USDE could put more than $300 million of Aave’s USDE-backed loans at risk of liquidation. This could trigger a sale of collateral to repay outstanding debt.
“To mitigate the risks associated with USDe depeg events, we propose hardcoding USDe prices into USDT,” the authors said.
community backlash
The proposal has drawn skepticism from Aave users, who question whether the approach addresses the underlying risks.
This is some of the community feedback on Aave’s proposal to hardcode the price of USDE to USDT. source: Aave Governance Forum.
“Hardcoding the USDe price to the USDT price seems a bit risky considering that USDe is not actually intended to be a stablecoin,” user Hazbobo pointed out. “What are the edge case risks involved? “What is the worst-case scenario?”
Another community member, ElliotNess, criticized the proposal for failing to address the underlying risks.
“This is disappointingly low-quality ARFC delivered by both service providers without delving into potential conflicts. Frankly, this can be said of all non-hardcoded assets listed in the Aave protocol,” they noted.
ElliotNess questioned the rationale for pegging USDE to USDT, suggesting that if Aave plans to hardcode the price of USDe, it would be better to peg the price of USDe directly at $1.00 to completely avoid secondary market price deviations.
The proposal is in early discussion stages and has not yet been scheduled for a formal vote.
At the time of publication, AAVE was trading at $340, up 7% in the last 24 hours and 230% over the past year.
Aave’s growth in 2024 was driven by expansion into new markets, including BNB Chain, Scroll, ZKsync Era, and Ether.fi. The protocol is also targeting additional integrations in 2025, with potential add-ons such as Sonic, Mantle, Ethereum layer 2 Linea, Bitcoin layer 2 BOB, Spider Chain, and Aptos awaiting community approval.
Ethena’s 2025 Roadmap
Ethena (ENA) surged 17% after announcing its 2025 roadmap detailing plans to integrate with Telegram and launch new dollar-saving products.
On January 3rd, Roadmap launched iUSDe, a wrapped version of sUSDe that currently offers a 10% yield. Ethena announced plans to integrate sUSDe into Telegram, leveraging its 900 million users. The integration will introduce an sUSDe-based payments and savings app with the goal of providing a “neobank experience” within the messaging platform.
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