[Proposal] Decommission the Ethena Isolated Pool on Ethereum and Explore USDe and sUSDe Integration in the Core Pool

Proposals
1

Summary

After reviewing the status of the Ethena isolated pool on Ethereum, it’s clear that it currently serves no active function. Their is Only 1 supplier across the four markets, and the Pendle assets reached maturity last month.

This proposal aims to clean up inactive components of the protocol and allow users to reallocate resources more effectively. Additionally, it opens the door for a potential new opportunity: introducing USDe and sUSDe into the Venus Core Pool, subject to Chaos Labs’ risk recommendations.

Proposal Objectives

  • Remove inactive markets from the Ethena isolated pool and deprecate the pool
  • Explore adding USDe and sUSDe markets to the Core Pool, pending Chaos Labs review

Details

1. Current State of the Ethena Pool

  • View the pool: Ethena Pool on Ethereum
  • No new suppliers or borrowers since deployed
  • Their is only one active participant in that pool
  • Pendle markets have matured and expired

2. Proposed Actions

  • Supplier withdraws funds supplied in this pool
  • Decommission all four markets and the Ethena IL pool
  • Coordinate with Chaos Labs to evaluate the risk profile of USDe and sUSDe
    • If approved, launch a Snapshot vote for its inclusion in the Core Pool

Why This Matters

  • Protocol Efficiency: Reduces clutter and minimizes inactive smart contracts
  • Potential Growth: USDe and sUSDe could bring new utility, liquidity, and composability to Venus on ETH Mainnet, pending risk review

Next Steps

  1. Gather feedback from the community here on the forum
  2. Request a risk assessment from Chaos Labs for USDe and sUSDe
  3. Draft a Snapshot proposal based on community and Chaos Labs input
  4. Supplier executes funds withdrawal and markets are removed if approved

Your Input is Needed

Points of discussion:

  • Are you in favor of decommissioning the inactive Ethena markets?
  • Would you support the addition of USDe and sUSDe to the Core Pool, assuming a green light from Chaos Labs?
  • Any concerns or alternative suggestions?

Please comment/reply below :arrow_down:

2 Likes
2

I agree to close the ethena isolation pool and introduce USDe and sUSDe into the core pool (Ethereum), because ethena assets are very potential assets and can bring rich returns to Venus.

3

100% Agree! GO GO GO, Let’s quickly implement the introduction of USDe and sUSDe into the core pool

4

I like this approach. Venus is a cutting edge defi player that not only proves efficiency on loans and borrowings, but also demonstrates advanced solutions for adding popular and liquid assets. fully support Danny’s suggestion!

5

Let’s add them in the core pool. Thx

6

Summary

Chaos Labs supports the proposal to deprecate the Ethena Isolated Pool and list sUSDe and USDe in the Ethereum Core Pool. Below, we provide our analysis and recommendations.

Ethena Isolated Pool Deprecation

After reviewing the current state of the Ethena isolated pool on Ethereum, Chaos Labs concurs that the market can be safely deprecated. The review confirms there is only one active supplier, no borrowing activity, and the Pendle assets associated with the pool have already matured. Deprecating this inactive market aligns with protocol efficiency goals, reducing unnecessary complexity and freeing resources for more impactful allocations.

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The user in question also maintains large positions on the BNB Core pool and Ethereum Core pool; as described in the proposal, they should be allowed to remove their supplied assets before the market is fully deprecated.

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However, we propose the following steps to effectively deprecate the market while ensuring this user is not adversely affected:

  • Set supply caps to 0
  • Set borrow caps to 0

These two actions will, in essence, freeze the market by preventing any new supplying or borrowing activity.

Specification

Market Asset Current Supply Cap Rec. Supply Cap Current Borrow Cap Rec. Borrow Cap
Ethereum Ethena sUSDe 50,000,000 0 - -
Ethereum Ethena PT-USDe-27MAR2025 850,000 0 - -
Ethereum Ethena USDC 50,000,000 0 46,000,000 0
Ethereum Ethena PT-sUSDe-27MAR2025 12,000,000 0 - -

List sUSDe and USDe in Ethereum Core

We agree with the proposal to list sUSDe and USDe in the Venus Ethereum Core to provide users a greater diversity of assets. Chaos Labs has previously reviewed these assets and found them acceptable for listing on Venus.

Pool Selection

However, it is important to acknowledge the inherent disadvantages Venus faces when integrating yield-bearing assets like sUSDe into its Core Pool. In isolated pools, yield-bearing assets can be assigned higher CFs due to their correlation with borrowable assets, allowing for greater leverage.

Conversely, in the Core Pool, the presence of uncorrelated borrowable assets necessitates more conservative CFs to mitigate liquidation risks, reducing leverage potential. While necessary from a risk perspective, this approach makes Venus less competitive compared to platforms that offer higher leverage through mechanisms like E-Mode on Aave.

Liquidity

The liquidity for both sUSDe and USDe against the uncorrelated asset WETH has improved significantly in recent months. 15M sUSDe can be swapped for WETH at less than 5% price impact.

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Meanwhile, 20M USDe can be swapped for WETH at the same price impact level, indicating robust liquidity on Ethereum.

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Collateral Factor

As described above, the availability of uncorrelated borrowable assets in the Core Pool calls for a lower CF than in the Isolated Pool. However, their strong liquidity allows us to recommend somewhat permissive collateral parameters. Specifically, we recommend setting both USDe and sUSDe’s CFs to 72% and their LT to 75%.

IR Curve

We recommend setting USDe’s IR curve equivalent to other stablecoins, while we recommend making sUSDe non-borrowable, given the lack of defined use cases for borrowing the asset. Given that USDe has sufficient history and has proved its resilience through multiple volatile periods, we recommend setting the RF to 10%, reflecting that it is less risky than other newly listed assets and thus does not need to build an insurance fund as quickly.

Supply and Borrow Caps

We recommend setting the caps according to our usual methodology, with the supply cap set to 2x the amount of liquidity available below the Liquidation Penalty; the borrow cap for USDe should be set slightly above the Kink. Thus, we recommend a starting supply cap of 20M sUSDe and 30M USDe, with a borrow cap of 25M USDe.

Pricing and Oracle

We recommend using the USDe/USD Chainlink price feed for USDe, while the sUSDe market should utilize the USDe/USD market rate multiplied by sUSDe/USDe exchange rate.

Specification

Parameter Value Value
Asset sUSDe USDe
Chain Ethereum Ethereum
Pool Core Core
Collateral Factor 72% 72%
Liquidation Threshold 75% 75%
Liquidation Penalty 10.00% 10.00%
Supply Cap 20,000,000 30,000,000
Borrow Cap - 25,000,000
Kink - 80%
Base - 0.0
Multiplier - 0.10
Jump Multiplier - 2.5
Reserve Factor - 10%

Disclaimer

Chaos Labs has not been compensated by any third party for publishing this recommendation.

1 Like