Aave Considers Hardcoding Ethena's USDe Price to Match Tether's USDt in Its Pricing Feeds

The proposal, co-authored by Chaos Labs and LlamaRisk, was submitted on Jan. 3 and seeks to protect Aave users from exposure to secondary market fluctuations.

A new proposal on Aave suggests locking Ethena’s USDe price to Tether’s USDt in Aave’s pricing feeds. The proposal, co-authored by Chaos Labs and LlamaRisk, was submitted on Jan. 3 and aims to protect Aave users from exposure to secondary market fluctuations. Notably, LlamaRisk is part of Ethena’s risk committee.

Aave (AAVE) is the largest decentralized finance (DeFi) lending protocol, with $37 billion in total value locked, enabling users to borrow and lend cryptocurrencies without intermediaries. Users can deposit assets into Aave’s liquidity pools and earn interest or borrow using crypto as collateral.

USDe (USDE), created by Ethena, is a synthetic dollar stablecoin backed by onchain assets and derivatives, unlike USDT, which relies on fiat reserves. USDE now ranks as the third-largest stablecoin, with a $5.85 billion market cap, trailing USDt (USDT) and USD Coin (USDC), according to CoinGecko.

Aave currently uses Chainlink’s USDe/US dollar price feed to value staked USDe (sUSDe), a staked version of USDE.

According to the proposal, a 5% drop in USDE’s price could put over $300 million worth of USDE-backed loans on Aave at risk of liquidation. This could trigger collateral sell-offs to repay outstanding debt.

“To mitigate the risk associated with a USDe depeg event, we propose hardcoding USDe’s price to USDT,” the authors stated.

Community members have expressed skepticism over the approach, questioning whether it addresses fundamental risks.

A snippet of community feedback on Aave’s proposal to hardcode USDE’s price to USDT. Source: Aave Governance Forum.

“Hardcoding the USDe price to USDT price sounds a bit risky given USDe isn’t really intended to be a stablecoin,” user Hazbobo pointed out. “What’re the edge case risks involved? What’s the worst case scenario?”

Another community member, ElliotNess, criticized the proposal for failing to address underlying risk factors.

“This is a disappointingly low-quality ARFC from two service providers without digging into any potential conflicts… Frankly, this can be said of every non-hardcoded asset listed on the Aave protocol,” they noted.

ElliotNess questioned the rationale behind pegging USDE to USDT, suggesting that if Aave plans to hardcode USDe’s price, it might as well peg it directly to $1.00 to avoid secondary market price deviations entirely.

The proposal is in its early discussion stage, with no formal vote scheduled yet.

At the time of publication, AAVE was trading at $340, up 7% in the past 24 hours and 230% over the past year.

Aave’s growth in 2024 was driven by expansion into new markets, including BNB Chain, Scroll, ZKsync Era, and Ether.fi. The protocol is also eyeing further integrations in 2025, with potential additions like Sonic, Mantle, Ethereum layer 2 Linea, Bitcoin layer 2 BOB, Spider Chain and Aptos, pending community approval.

Ethena’s 2025 roadmap

Ethena (ENA) surged 17% following the release of its 2025 roadmap, detailing plans to integrate with Telegram and launch a new dollar savings product.

The Jan. 3 roadmap introduced iUSDe, a wrapped version of sUSDe, which currently offers a 10% yield. Ethena announced plans to integrate sUSDe into Telegram, leveraging its 900 million users. The integration will introduce a payment and savings app based on sUSDe, aiming to deliver a “neobank experience” within the messaging platform.