A new proposal submitted on January 3 by Chaos Labs and LlamaRisk aims to hardcode the price of Ethena’s USDe to match Tether’s USDt in Aave’s pricing feeds. This proposal seeks to protect Aave users from exposure to secondary market fluctuations.
Background
Aave is the largest decentralized finance (DeFi) lending protocol, with $37 billion in total value locked, allowing users to borrow and lend cryptocurrencies without intermediaries. Users can deposit assets into Aave’s liquidity pools and earn interest or borrow using crypto as collateral.
USDE, created by Ethena, is a synthetic dollar stablecoin backed by on-chain assets and derivatives, unlike USDT, which relies on fiat reserves. USDE now ranks as the third-largest stablecoin, with a $5.85 billion market cap, trailing USDt and USD Coin, according to CoinGecko.
Why Peg USDE to USDT?
Aave currently uses Chainlink’s USDe/US dollar price feed to value staked USDe (sUSDe), a staked version of USDE. According to the proposal, a 5% drop in USDE’s price could put over $300 million worth of USDE-backed loans on Aave at risk of liquidation. This could trigger collateral sell-offs to repay outstanding debt.
Proposal
"To mitigate the risk associated with a USDe depeg event, we propose hardcoding USDe’s price to USDT," the authors stated.
The proposal suggests that by linking USDe’s value directly to USDt, it will ensure seamless integration and avoid disruptions caused by transient price fluctuations in USDE.
Community Backlash
The proposal has drawn skepticism from Aave users, who question whether the approach addresses fundamental risks. A snippet of community feedback on Aave’s proposal to hardcode USDE’s price to USDT:
"Hardcoding the USDe price to USDT price sounds a bit risky given USDe isn’t really intended to be a stablecoin," user Hazbobo pointed out. "What’re the edge case risks involved? What’s the worst-case scenario?"
Another community member, ElliotNess, criticized the proposal for failing to address underlying risk factors:
"This is a disappointingly low-quality ARFC from two service providers without digging into any potential conflicts… Frankly, this can be said of every non-hardcoded asset listed on the Aave protocol," they noted.
ElliotNess questioned the rationale behind pegging USDE to USDT, suggesting that if Aave plans to hardcode USDe’s price, it might as well peg it directly to $1.00 to avoid secondary market price deviations entirely.
Conclusion
The proposal is in its early discussion stage, with no formal vote scheduled yet. At the time of publication, AAVE was trading at $340, up 7% in the past 24 hours and 230% over the past year.
Aave’s growth in 2024 has been driven by expansion into new markets, including BNB Chain, Scroll, ZKsync Era, and Ether.fi. The protocol is also eyeing further integrations in 2025, with potential additions like Sonic, Mantle, Ethereum layer 2 Linea, Bitcoin layer 2 BOB, Spider Chain and Aptos, pending community approval.
Ethena’s 2025 roadmap has been released, detailing plans to integrate with Telegram and launch a new dollar savings product. The integration will introduce a payment and savings app based on sUSDe, aiming to deliver a ‘neobank experience’ within the messaging platform.
Key Takeaways
- Aave users are skeptical about the proposal to hardcode USDE’s price to USDT.
- The proposal aims to protect Aave users from exposure to secondary market fluctuations.
- Ethena’s 2025 roadmap includes plans to integrate with Telegram and launch a new dollar savings product.
Recommendations
- Further discussion is needed on the proposal to ensure that it addresses fundamental risks.
- Aave users should be aware of the potential consequences of hardcoding USDE’s price to USDT.
What’s Next?
The proposal will continue to be discussed in the Aave Governance Forum. A formal vote has not been scheduled yet, and community feedback is still ongoing.
About Aave
Aave is a decentralized finance (DeFi) lending protocol that allows users to borrow and lend cryptocurrencies without intermediaries. With $37 billion in total value locked, Aave is the largest DeFi lending protocol in the market.
About Ethena
Ethena is a blockchain-based platform that creates synthetic assets backed by on-chain assets and derivatives. USDE, created by Ethena, is a synthetic dollar stablecoin that ranks as the third-largest stablecoin in the market.
Sources
- Aave Governance Forum: Proposal to hardcode USDE’s price to USDT
- CoinGecko: Stablecoin Market Cap Rankings
- Ethena: 2025 Roadmap