A new proposal to hardcode the price of Ethena’s USDe to match Tether’s stablecoin USDT in Aave’s price feed has received massive backlash from community members. The proposal, co-authored by Chaos Labs and LlamaRisk, claims to protect Aave users from secondary market fluctuations.
According to the proposal, Chaos Labs and Ethena risk committee member LlamaRisk want to align sUSDe Oracle with USDT prices. This would ensure seamless integration and eliminate disruptions caused by temporary USD price fluctuations. Aave is one of the largest decentralized finance (DeFi) platforms, with a total value captured (TVL) of $37 billion.
The platform allows users to borrow and lend cryptocurrencies without intermediaries. Users can borrow from Aave and use crypto as collateral, while also depositing into Aave’s liquidity pools at interest.
Ethena’s USDe is a synthetic stablecoin backed by on-chain assets and derivatives. The difference between USDe and USDT is that the latter is backed by fiat reserves. USDe currently ranks third among stablecoins with a market cap of $5.85 billion, just behind USDT and USDC.
Authors describe the reasons for the proposal
Under the proposal, Aave will use Chainlink’s USDe/USD price feed to value USDe stakes (sUSDe, the stablecoin’s stake version). The setup opens the sUSDe supported positions up to the price divergence from the USDe on the secondary market. The proposal noted that the arrangement makes volatility unlikely, but if this happens it would pose liquidation risks to users and the protocols.
The proposal also stated that if USDe suffered a 5% price drop, it could jeopardize more than $300 million in USDe-backed loans to Aave. It could also lead to a sell-off of collateral debt, which would be used to repay outstanding debt. However, to eliminate such risks, the authors offer an improved pricing model.
The authors want a USDT/USD feed to replace the USDe/USD feed in the secondary market. The proposal noted that decoupling the stablecoin from its short-term fluctuations will reduce any liquidation risks for USD-backed positions.
“To mitigate the risk associated with a USDe depeg event, we propose to hardcode the price of USDe to USDT,” the proposal reads.
Community response and Ethena’s roadmap to 2025
Meanwhile, Aave users expressed their disapproval of the proposal, with most questioning whether the approach addresses fundamental risks. A user Hazbobo pointed out that hardcoding USDe to USDT is risky because the former is not built as a stablecoin, and asked about the risks involved.
Another user, ElliottNess, said the proposal did not address risk factors. “This is a disappointingly low-quality ARFC from two service providers without addressing potential conflicts… Frankly, this could be said of any non-hardcoded item listed in the Aave protocol,” the user said.
EliottNess asked about why USDe was pegged to USDT, noting that if Aave really wanted to hard-code USDe, it would have to do a direct peg to $1, a move that will help it avoid anomalies entirely. Meanwhile, the proposal is in its early stages and no votes have been cast yet.
Aave is also doing well in the market, trading at $340, up 7% in the last 24 hours.
Aave experienced enormous growth in 2024 thanks to the expansion into new markets. In addition to the BNB Chain, it has moved to Scroll, ZKsync, Era and Ether.fi. The protocol is also expected to hit more chains this year, eyeing partnerships with Sonic, Mantle, BOB, Aptos and a few others, pending community approval.
Ethena, on the other hand, saw a 17% increase after publishing its 2025 roadmap. The platform has detailed plans to partner with messaging giant Telegram and roll out new dollar savings products this year. The roadmap also announced the packaged version of sUSDe, the iUSDe, which offers a 10% return. Ethena aims to capitalize on Telegram’s 900 million users with its plan to integrate sUSDe onto the platform. The platform will provide a neo-banking experience within Telegram by offering a payment and savings app.
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