Aave Proposal to Peg Ethena’s USDe to USDT Sparks Community Debate
A proposal to peg Ethena’s USDe stablecoin to Tether’s USDT has ignited debate within the Aave community, raising questions about its implications and effectiveness in mitigating risks. The proposal, submitted by Chaos Labs and LlamaRisk on January 3, aims to hardcode USDe’s price to USDT in Aave’s pricing feeds, but critics are questioning whether it addresses deeper concerns.
The Proposal: Reducing Risk by Pegging USDe to USDT
The initiative seeks to protect Aave users from $300 million in potential liquidations triggered by a 5% price drop in USDe. Ethena’s USDe, a synthetic dollar stablecoin backed by on-chain assets and derivatives, is currently valued using Chainlink’s USDe/USD oracle.
The authors argue that pegging USDe directly to USDT’s price would stabilize sUSDe-backed loans on Aave and prevent collateral sell-offs in case of price deviations. “This ensures seamless integration and avoids disruptions caused by transient price fluctuations in USDe,” the proposal stated.
Community Pushback: Concerns Over Core Risks
The proposal has faced skepticism within the Aave governance forums. Some community members believe it falls short of addressing fundamental risks.
- Hazbobo, a user, noted, “Hardcoding the USDe price to USDT price sounds risky given USDe isn’t really intended to be a stablecoin. What are the worst-case scenarios?”
- ElliotNess criticized the proposal, calling it a “low-quality ARFC” that neglects to address underlying issues or explore potential conflicts of interest. “Why not peg USDe directly to $1.00 instead?” they asked, highlighting broader concerns about price pegging.
As of now, the proposal remains in the discussion stage, with no formal vote scheduled.
Aave’s 2024 Momentum and Expansion
Despite the controversy, AAVE, Aave’s governance token, has seen significant growth, trading at $340, up 7% in 24 hours and 230% over the past year. Aave’s 2024 expansion into BNB Chain, ZKsync Era, and Ether.fi has driven its value, and the protocol is targeting further integrations in 2025, including Ethereum layer 2 Linea and Bitcoin layer 2 BOB.
Ethena’s Ambitious 2025 Roadmap
Meanwhile, Ethena unveiled a bold roadmap for 2025, propelling its token ENA up 17%. Key initiatives include:
- Launching iUSDe, a wrapped version of sUSDe offering a 10% yield.
- Integrating sUSDe into Telegram, enabling payments and savings for its 900 million users through a “neobank experience.”
Conclusion
While the Aave proposal aims to stabilize the USDe market, its community remains divided, emphasizing the need for further scrutiny and transparency. As Aave and Ethena continue to expand and innovate, their evolving strategies will play a critical role in shaping the DeFi ecosystem in 2025.
