Proposal to add Optimism AAVE aOptUSDC (V3) as a capped collateral to Interest Protocol.
Overview
The latest iteration of Aave’s lending market, like previous versions, provides a tokenized representation of Optimism bridged USDC (the native liquidity token for Optimism instance of IP currently) that has been deposited into the Aave Protocol. It accrues interest at a rate set algorithmically by the interest rate curve for deposited and borrowed USDC. At time of writing, that is 9.62%. aOptUSDC is freely transferrable and redeemable. The token contract is upgradeable by Aave governance.
Because aOptUSDC (V3) is interest-bearing USDC redeemable with Aave, which is not the issuer of USDC, there is a risk of the token becoming illiquid should Aave have insufficient USDC reserves to meet withdrawals. To mitigate this, Aave, similar to Interest Protocol, automatically increases rates rapidly to encourage new USDC to enter the protocol or for borrowed USDC to be returned. There is no obvious mechanism to introduce slippage risk when redeeming.
The stable value of aOptUSDC in relation to USDC, the sole reserve asset of Interest Protocol at time of writing, makes it a secure asset that is also yield bearing. In times that Interest Protocol charges users less than aOptUSDC yields, it allows for users to safely arbitrage the rates, resulting in higher aOptUSDC and USDi usage.
Token Address: 0x625e7708f30ca75bfd92586e17077590c60eb4cd
Capped Token address:
LTV: 95%
Liquidation incentive: 1%
Maximum Cap: 200,000
Oracle Address:
Primary oracle:
Secondary oracle:
Price deviation: N/A
Liquidity
Market Cap: $16M at time of writing.
Liquidity: Equivalent to USDC reserves at Aave V3; ~1.44 million at time of writing
Volatility: Stablecoin
Coingecko 7-day avg 24hr volume: N/A
Notable exchanges: N/A
Technical risks
Type of contract: staked asset token
Underlying asset: USDC
Time: Deployed Mar 1, 2022
Value:
Privileges: N/A
Upgradability: Yes
Relevant References
Aave v3 Optimism Risk Documentation
Aave v3 Optimism Marketplaces switch to Optimism on tab
Aave v3 Smart Contract Risk
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