Aave snubs Sky’s USDS as collateral and 3 ‘underperforming’ chains
Following a Snapshot vote, Aave governance looks set to remove Sky’s USDS as collateral. Another vote, in progress, suggests shutting down “underperforming” instances on three chains.
Both proposals were brought forward by Aave governance delegation ACI.
The first proposal, which passed with 99.5% approval, says USDS “generates negligible revenue while its issuance model introduces asymmetric risks.”
As well as disabling its use as collateral, the proposal recommends increasing USDS’s reserve factor (the proportion of borrower interest paid to Aave’s treasury) to 25% and removing it from the higher efficiency “e-Mode” for correlated assets.
Aave is a crypto lending platform and the DeFi sector’s largest protocol, with $33 billion of total value locked (TVL). Sky, formerly Maker, is the issuer of stablecoins USDS and (previously) DAI, which is likely next in the firing line.
Read more: Is Aave’s ‘Balance Protection’ backed by Relm — an FTX insurer?
GFX Labs’ Paper Imperium called the vote a “reputational blow for Maker/Sky,” while Sky founder Rune Christensen believes there were “misunderstandings” over certain mechanics of the Sky ecosystem.
‘Underperforming’ instances
A second vote, a “temperature check” on paring down Aave v3 instances, is currently underway, with YAE votes sitting at 99.9%.
It recommends focusing on chains “which present the highest opportunity for revenue generation.”
The post suggests winding down Aave’s v3 instances on zkSync, Metis, and Soneium instances. It argues that, of Aave v3’s $175 million annualized revenue, the three deployments combined contribute just $76,000 and represent just 0.05% of total TVL.
It also recommends upping reserve factors to “improve revenue on instances which are currently underperforming,” in order to “offset the costs and risks they incur.”
For future deployments, the proposal suggests a $2 million “annual revenue floor.”
Solana platforms infighting
Solana-based lending platform Kamino allegedly blocked its users from migrating positions via Jupiter Lend’s refinancing tool. A Fluid developer described the move, which appears to specifically target the Jupiter program, as “ignoring open-finance principles.”
Read more: Justin Sun defends HTX while it lends 92% of its USDT on Aave
However, another Solana developer pointed out that Jupiter Lend is closed-source and “upgradeable via multisig.”
They explain, “neither side is community DAO governed, and either program can change rules or restrict access.”
The fact that Kamino’s code is available to display the restriction puts it “closer to open finance” than Jupiter Lend, they argue.
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