Aave’s re-created proposal #535 is set to enter voting in less than 24 hours, seeking to add Ethena’s USDe to the Aave V4 Core Hub on Avalanche through a new Ethena Ecosystem Spoke. The plan follows a risk review from LlamaRisk, which said it supports the listing but only under conservative initial settings.

The proposal would bring USDe to another Aave market after earlier listings on V3 and V4 elsewhere. On Avalanche, however, the reserve is designed as collateral-only from the start, with borrowing disabled and a 60 million USDe add cap.

Why the proposed listing is more cautious on Avalanche

LlamaRisk said USDe on Avalanche should launch with tighter controls because local market conditions are still limited. According to the assessment, decentralized exchange liquidity for USDe on Avalanche is concentrated in a single Uniswap V3 USDe/USDC pool with about $0.5 million in total value locked, which it described as relatively low for an initial rollout.

The reviewer also pointed to recent changes in USDe’s interest rate model, especially a higher base rate, as a reason borrowing demand is likely to be weak at current rates. Based on those factors, it recommended a collateral-only setup rather than a full market with borrowing enabled.

Bridge structure and control risks flagged in the review

Unlike on Ethereum, native USDe minting is not available on Avalanche. Instead, the token reaches the network through LayerZero’s Omnichain Fungible Token standard, with backing escrowed on Ethereum. The OFT mesh for USDe currently spans 31 networks.

LlamaRisk highlighted governance and incident-response concerns around that bridge design. On Avalanche, the USDe OFT is controlled by a custom timelock controller with a 24-hour delay, but some functions can bypass that delay through a whitelist. The setPeer function is currently whitelisted for Ethena’s 5-of-10 multisig, allowing peers in the OFT mesh to be added or removed without waiting 24 hours.

The report said that arrangement could be useful during an incident, but it also creates a risk if an attacker were to gain control of an address on a compromised chain within the OFT network. It added that a separate pauser mechanism does not currently exist, and timelock coverage is still missing on some major networks in the mesh, though Ethena is said to be working to expand that coverage over the coming weeks.

Key parameters in proposal #535

The Aave V4 configuration proposed for Avalanche would list USDe with a 93% collateral factor, a maximum liquidation bonus of 2%, a 10% liquidation fee, and borrowing set to false. The reserve would also use a collateral risk setting of 16.50% and have receive shares enabled.

For capacity limits, the proposal sets a USDe add cap of 60,000,000 and a draw cap of 0, reflecting the decision to block borrowing. Within the same Ethena Ecosystem Spoke, USDT and USDC would be borrowable but not usable as collateral, with draw caps of 50,000,000 and 3,000,000 respectively, while both start with add caps of 0.

The pricing recommendation is to value USDe using the capped USDT/USD feed, in line with the approach used for other USDe-denominated assets. The package also includes a recommendation to raise the USDT add cap on Avalanche’s Main Spoke to 60,000,000.

What happens next

If governance approves the proposal, USDe would be onboarded to Aave V4 on Avalanche under the conservative framework laid out in the risk review rather than as a fully borrowable asset. That means the immediate use case would center on collateral posting, with expansion depending on later governance decisions and market conditions.

For now, the confirmed next step is the vote on the re-created proposal #535. The risk case supporting it remains conditional on the current bridge setup, limited Avalanche liquidity, and the operational safeguards described in the LlamaRisk assessment.

Source: governance.aave.com