Forum Link: https://forum.inverse.finance/t/proposal-to-add-susde-market-to-firm/443

Summary

This proposal seeks to integrate sUSDe as a collateral asset on FiRM, Inverse Finance’s fixed-rate lending protocol. sUSDe, the yield-bearing stablecoin from Ethena, offers significant benefits due to its innovative delta-neutral strategy and robust on-chain liquidity. The addition of sUSDe will enable FiRM users to leverage their holdings while retaining the yield benefits, thereby enhancing the overall utility and attractiveness of the FiRM platform. This market is a simple deployment utilizing the sUSDe/USD Chainlink feed and a SimpleERC20 escrow implementation.

Background

Ethena’s USDe, launched in February 2024, is a synthetic dollar collateralized by a diversified mix of on-chain assets and backed by delta-neutral positions on perpetual futures markets. USDe has rapidly grown, amassing over $3B in TVL, demonstrating strong market demand and adoption. The delta-neutral strategy captures funding rate payments, ensuring the stability of USDe, while staked USDe (sUSDe) provides users with yield opportunities. As of August 1st, 2024, sUSDe offers an APY of approximately 12.3%, making it an appealing collateral option for FiRM.

Ethena’s innovative approach has already led to significant integrations with major DeFi platforms and centralized exchanges, including Curve, Maker, and Binance, Bybit, to name a few. These partnerships have contributed to the protocol’s rapid growth and solidified its position in the DeFi ecosystem.

Risk Assessment

A comprehensive risk assessment was conducted by the RWG, which can be accessed here, to evaluate the implications of integrating sUSDe into FiRM. The key considerations include:

• Governance: Ethena is transitioning towards a fully operational DAO, with governance planned to be driven by ENA token holders. However, current governance functionalities are limited, and major decisions are still managed by the Ethena core team.
• Security: Ethena has undergone multiple audits by reputable firms such as Quantstamp, Spearbit & Cantina, and independent auditor Pashov. No critical or high-severity issues were identified, and medium to low-severity issues have been addressed or acknowledged. Ethena also runs a robust bug bounty program via Immunefi.
• Regulatory Risks: Regulatory scrutiny, particularly with new regulations in the EU, impact Ethena's operational flexibility, particularly regarding its reliance on centralized exchanges and custodians, potentially leading to compliance challenges and increased oversight.
• Collateral & Liquidity: USDe showcases substantial on-chain liquidity, with significant liquidity pools on platforms like Curve. The top 10 LPs in terms of TVL total $93.3MM in paired asset depth, ensuring low slippage in larger transactions. However a previous snapshot from June 5th has paired asset depth at $139.21MM. So while TVL has stayed roughly the same, pairing depth is down 45.9MM or -33% in a 2 month period.
• Competitive Edge: Ethena’s rapid growth and unique yield-generating strategy position it well in the DeFi space. Notably, platforms like Morpho Blue, Curve’s Llamalend, and Fraxlend have integrated USDe and sUSDe into their lending and borrowing markets, showcasing strong demand. FiRM’s competitive edge amongst these protocols lies in its fixed interest rate offering.

The RWG’s Total Asset Score for sUSDe is 8.92/10, reflecting strong market capitalization, trading volume, and token utility, but noting areas for improvement in governance and risk management transparency.

On-Chain Actions

1. Add sUSDe Market to DBR contract
2. Set borrowController of Market to FiRM BorrowController
3. Set market supply ceiling to 5,000,000 DOLA
4. Set daily limit in BorrowController to 250,000 DOLA
5. Set Collateral Factor to 90%
6. Set Liquidation Factor to 70%
7. Set Liquidation Incentive to 5%
8. Approve sUSDe market on the DBR Helper
9. Set Minimum Debt Amount in BorrowController to 3000 DOLA
10. Set stalenessThreshold for sUSDe market to 86460
11. Set FiRM Oracle price feed for sUSDe to the deployed Chainlink sUSDe/USD PriceFeed contract
12. Add sUSDe Market to ALE