- Aave’s proposal to hardcode Ethena’s USDe to USDT raises concerns about potential risks.
- Community members question whether the approach truly addresses the volatility of synthetic stablecoins.
What happened: Community scepticism over proposal to peg USDe to USDT
A new proposal on Aave, submitted by Chaos Labs and LlamaRisk on January 3, has sparked debate within the decentralised finance (DeFi) community. The proposal aims to stabilise Ethena’s synthetic stablecoin, USDe, by pegging its value to Tether’s USDT in Aave’s pricing feeds.
According to the proposal, this hardcoding measure seeks to protect Aave users from market fluctuations and potential mass liquidations. The authors highlight that a 5% drop in USDe’s price could endanger over $300 million in USDe-backed loans, risking forced collateral sales.
However, Aave users have raised concerns. One user, Hazbobo, questioned the rationale: “Hardcoding the USDe price to USDT price sounds a bit risky given USDe isn’t really intended to be a stablecoin.”
Another prominent user, ElliotNess, criticised the proposal for overlooking core issues, suggesting that pegging USDe to $1 directly would be more logical if stability is the goal. With Ethena’s USDe designed to be backed by on-chain assets rather than fiat reserves, critics argue that pegging it to USDT might introduce conflicts with its core principles.
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Why it’s important
The proposal underscores the ongoing challenge of balancing risk management with decentralisation in DeFi protocols. Aave, which holds $37 billion in total value locked, is the largest decentralised lending platform, allowing users to borrow and lend assets without intermediaries.
Ethena’s USDe, the third-largest stablecoin at $5.85 billion market cap, presents an alternative to fiat-backed tokens such as Tether’s USDT. Critics argue that hardcoding prices may set a precedent that undermines the credibility of decentralised oracles and introduces unnecessary centralisation.
The debate also highlights broader concerns about synthetic assets and their exposure to liquidity shocks. Ethena’s roadmap for 2025, which includes the launch of iUSDe, aims to provide a 10% yield via integrations such as Telegram’s 900-million-user base.
As DeFi protocols like Aave expand into ecosystems such as BNB Chain and ZKsync Era, the outcome of this proposal could influence how synthetic stablecoins are managed and priced within decentralised finance.
