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Aave Community Rejects Proposal to Link USDe to USDT
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A proposal presented by Chaos Labsa blockchain risk management platform, generated controversy in the blockchain community. Aavelargest lending protocol in decentralized finance (DeFi). The initiative, co-authored by Llamarisksought to link the price of USDeissued by Ethenaat the price of USDT in the Aave price feed.
The proposal’s authors argued that the measure would protect Aave users against fluctuations in the secondary market. That’s because would align USDe and USDT prices. According to the proposal, the current configuration exposes users to risks of settlements if there are deviations in the price of USDe on the secondary market.
The idea was to replace the price feed of USD/USDprovided by Chainlinkby the USDT/USDthus reducing potential volatility.
Despite the arguments, members of the Aave community have expressed significant concerns. One of the main points was the fact that USDe not be a traditional stablecoin. Unlike USDT, which maintains a fixed value, the USDe operates with ETH-backed positions and short ETH positions. This makes it susceptible to market fluctuations.
THE Aavewhich currently has US$22 billion in total blocked value (TVL) according to data from DeFi Llamaneeds to carefully evaluate the systemic risks associated with the proposal.
Critics have pointed out that tying the price of USDe to USDT could increase the probability of settlements cascade if the underlying collateral (ETH and short positions) did not maintain sufficient liquidity under stressed conditions. This could transfer risks from users to the protocolpotentially affecting Aave’s treasury and resulting in bad debts.
A user identified as Hazbobo highlighted that the proposal was risky, due to the non-stable nature of USDe. Furthermore, he questioned whether there were precedents for price tying for similar assets.
Meanwhile, another member, under the pseudonym ElliotNesscriticized the quality of the proposal, stating that the authors did not adequately consider possible conflicts. He classified the proposal as an attempt at aggressive growth disguised as a risk mitigation suggestion.
The proposal comes at a time when the Aave seeks to balance innovation and security, accounting for the majority of the DeFi market. Any decision involving changes to price feeds can have significant impacts on the stability of the protocol and user confidence.
THE AAVE token price has plummeted more than 11% in the last 24 hours, according to data from CoinGecko. At the time of writing, the crypto asset is costing US$315.86.
Aave Community Rejects Proposal to Link USDe to USDT
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Aave Community Rejects Proposal to Link USDe to USDT
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Aave Community Rejects Proposal to Link USDe to USDT
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Aave Community Rejects Proposal to Link USDe to USDT
