An archive of our post on Aave Governance forum, in the context of our scope of Risk service provider.

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This is an archive of our post on Aave governance forum. Read the full thread here.

#LlamaRisk - Monthly Community Update

#January 2025

#Overview

LlamaRisk presents our January 2025 monthly update, summarizing key activities and outlining upcoming priorities.

#Highlights

#Recommendations and inputs

#Asset onboarding

• [ARFC] Onboard Pendle PT tokens to Aave V3 Core Instance - Supporting but advising delayed onboarding due to Ethena exposure risks and recommended two pricing methods to address PT valuation challenges. Pricing PT token is key here, we’ve explored different options and laid out our recommendation.

• [TEMP CHECK] Onboard pufETH to Aave V3 Core Instance - Preliminary assessment did not support onboarding due to low demand, declining TVL, and lack of a bug bounty program.

• [ARFC] Add EURC to BASE Aave V3 - Supporting while highlighting concerns about the lack of public audit reports and the absence of a Timelock for upgrades.

• [ARFC] Onboard ggAVAX to Aave V3 Avalanche Instance - Recommended a cautious onboarding with a single siloed E-mode, highlighting risks from unaudited smart contracts and centralization under Multisig Labs.

• [ARFC] Onboard rstETH to Aave V3 Prime Instance - Advised against onboarding due to low liquidity depth, lack of a bug bounty, and pending asset delegation activation.

#New Chain

• [ARFC] Deploy Aave on Rootstock Network - Supporting with emphasis on rUSDT borrowing against RBTC while highlighting lower security guarantees of its ERC-20 token bridge.

• [ARFC] Deploy Aave v3 on BOB - Highlighted early-stage ecosystem with low stablecoin TVL (noted GHO opportunity), centralized network operations, and absence of a public fraud-proof system.

• [ARFC] Deploy Aave v3 on Mantle - Supporting onboard with conservative parameters while highlighting concerns about the incomplete fault-proof system and absence of bug bounty.

• [ARFC] Deploy Aave v3 on Sonic - Supporting with low initial caps while highlighting concerns about the unclear upgrade management process. @bgdlabs recently posted their own analysis, which should accelerate deployment.

#GHO related

Reviewed GHO initiatives by @TokenLogic:

• [ARFC] Deploy stataUSDC and stataUSDT GSMs on Ethereum - Supporting with analysis on the potential future impact on Aave and projected opportunities, along with recommended parameters.

• [ARFC] USDT GSM Bucket and Exposure Cap increase - Engaged in discussions on GSM utility and its future direction.

• [ARFC] Risk Stewards - Reduce GHO Borrow Rate Prime Instance - Supporting with a recommendation to monitor GHO liquidity changes before considering an increase in the GHO borrow cap.

#E-modes

• [ARFC] Onboard rsETH to Scroll V3 Instance - Flagged a security risk in a legacy function in the RSETHPool contract, which was swiftly patched following our communication with the Kelp team.

• [ARFC] Onboard wrsETH and WBTC to ZKsync V3 Instance - Recommended cautious onboarding due to WBTC’s limited liquidity and reiterated concerns about the legacy function risk.

• [ARFC] Onboard rsETH to Arbitrum and Base V3 Instances - Supporting while noting the absence of a Timelock slowing down contract upgrades.

• [ARFC] sUSD Risk Parameter Adjustment - Supporting with a recommendation to set E-Mode LTV to 0 to prevent new exposure.

#Misc.

• [ARFC] Supply and Borrow Cap Risk Oracle Activation - Provided our support to @ChaosLabs while requesting a bit more information and lessons learned from the WETH borrow rate pilot project on the Prime instance.

• [ARFC] wstETH Borrow Rate Update - Supporting the change with emphasis on its effects and potential risks associated with the update.

• [ARFC] Prime Instance - wstETH Borrow Rate + rsETH Supply Cap Update - Supporting and emphasizing tail-end risks of collateral depegs and short-term reliance on limited rsETH DEX liquidity during withdrawal periods.

#Research and analysis

• [ARFC] Sunset stMATIC on Polygon instance - Authored proposal to freeze stMATIC on Aave V3 Polygon following Lido’s announcement of sunsetting stMATIC.

• LlamaRisk Insights: Regulatory Pressure on USDT and Legal Features of USDT0 - Legal brief discussing regulatory concerns surrounding USDT and the USDT0 protocol.

• LlamaRisk Insights: Tether’s Regulatory Status in El Salvador - Discussed developments and regulatory implications of Tether relocating operations to El Salvador. Full research link.

• [ARFC] sUSDe and USDe Price Feed Update - Co-authored proposal with @ChaosLabs to align sUSDe oracle with USDT pricing. Provided follow-up analysis on pricing trade-offs, safety mechanisms, and bad debt scenarios.

#Community Engagement

• Actively engaged with key stakeholders, like the discussion on GSM utility and its future direction.

• Collaborated with @ChaosLabs on a joint proposal, followed by addressing community concerns through detailed analysis.

#Upcoming Focus Areas

• Preparing for the release of Umbrella

• Analyze and make parameter recommendations for new assets and markets.

• Recommendation for legacy/underutilized assets offboarding

We welcome community feedback and suggestions. Please share any questions, ideas, or areas where you would like increased focus from the LlamaRisk team.