Proposal to Add DOLA/sUSDe Yearn LP Market to FiRM

FiRM
1

Summary:

This proposal seeks to integrate the DOLA/sUSDe LPT from Curve Finance as a collateral asset on FiRM, Inverse Finance’s fixed-rate lending protocol. The DOLA/sUSDe LP offers stable liquidity positions that include DOLA and sUSDe, making it a strong candidate for capital-efficient lending within FiRM.

The proposed DOLA/sUSDe LP market will help expand FiRM’s offerings in line with previous successful LPT collateral integrations like DOLA/crvUSD LP, the DOLA/FRAXpyUSD LP, and the DOLA/FRAXBP. We plan to deploy two distinct DOLA/sUSDe LP markets; one that adheres to the convex strategy and the market which, utilizing the same underlying LPT, aligns with Yearn’s autocompound strategy. This proposal pertains to the Yearn-aligned DOLA/sUSDe LP market on FiRM.

This integration is another step in Inverse Finance’s broader strategy to deepen its collaboration with Frax Finance and Curve, while enhancing the capital efficiency of FiRM and increasing borrowing opportunities for users.

Background:

The DOLA/sUSDe LP is hosted on Curve Finance and represents a strategic collaboration between Inverse Finance and Ethena Labs. The LP is designed to support efficient, low-slippage trades between DOLA and sUSDe, allowing liquidity providers to earn competitive yields while maintaining stable liquidity in the pool. sUSDe, through the approval of the sUSDe market, and the recent PT-sUSDe-MAR272025 market had been thoroughly assessed by Inverse Finance’s RWG prior to this latest proposal.

When FiRM borrowers leverage up their LP positions using ALE, single-sided DOLA is pumped into the liquidity pool via the flashminter, creating an arbitrage opportunity due to the pool imbalance. The 200 A Parameter of the Curve pool allows the pool to level off as FRAX and/or USDC is added by arbitragers. This approach enhances DOLA liquidity without removing other stablecoins from the pool. As a result, lending capital efficiency is significantly improved. For example, typically for every 1 DOLA lent out and sold, the AMM Feds 1 need to contract 2.5 DOLAs to counteract the impact on liquidity. In contrast, when 1 DOLA is lent out and added to a DOLA liquidity position, only 1 DOLA needs to be contracted, resulting in a 150% increase in lending capital efficiency.

Risk Assessment:

Complete Risk Assessment - DOLA/sUSDe LP Collateral on FiRM

The RWG conducted a risk assessment (linked above) which explored the integration of the DOLA/sUSDe LPT as collateral on FiRM. This assessment combines both quantitative and qualitative analysis, covering governance, security, liquidity, and competitive factors, and considering the unique characteristics of sUSDe and the broader market context. These are summarized below:

  • Governance: Ethena operates under a mostly centralized governance model centered around the ENA token, with current decisions primarily managed by the Ethena team. However, initial progress towards decentralization is underway, as recent proposals—such as the Wintermute-authored ENA fee switch—signal advancements toward an eventual decentralized governance.
  • Security: Ethena prioritizes security with extensive audits, including evaluations from Zellic, Quantstamp, Pashov, and Spearbit, and runs a robust Immunefi bug bounty program with a $3M maximum payout. At the same time, the Curve-related smart contracts governing the DOLA/sUSDe have been rigorously tested and are subject to ongoing security reviews and Curve’s own bug bounty program. Overall, despite these measures, the LPT and the sUSDe component of the LP carries inherent risks users must be aware of.
  • Regulatory Risks: Ethena’s reliance on custodians introduces potential regulatory and operational risks, but the protocol’s robust attestations and compliance measures bolster its resilience.
  • Competitive Edge: FiRM’s inclusion of the DOLA/sUSDe LP marks its fourth stable LP market, showcasing a competitive edge by offering fixed-rate borrowing for liquidity providers. While competitors like FraxLend have integrated LPs, FiRM’s fixed-rate loans and ALE leverage mechanics present a distinct advantage in capital efficiency.
  • Oracle and Price Feed Considerations: FiRM employs a conservative oracle mechanism using Chainlink feeds for sUSDe, the sUSDe:USDe exchange rate, and the Curve pool’s virtual price to calculate the LP’s USD value. This pessimistic price feed ensures robust collateral valuation and stability in volatile scenarios.
  • Liquidation Mechanisms: The liquidation factor and incentive are optimized to encourage active liquidator participation. Arbitrage opportunities with other DOLA and/or sUSDe LPs will ensure that large liquidations do not lead to a liquidation cascade. The liquidation process will pull vault tokens, convert them to LP tokens, and then allow liquidators to realize value through balanced withdrawals, ensuring efficient liquidation routes.

The DeFi landscape is dynamic, and the RWG is committed to continuous monitoring of the DOLA/FRAXpyUSD LP’s performance as collateral. Regular updates to risk models, market parameters, and liquidity metrics will be made to study any changing conditions. This proactive approach will ensure that FiRM remains a resilient and adaptable platform, capable of managing new risks as they emerge.

On-Chain Actions

  1. Add DOLA/sUSDe Yearn Market to DBR contract
  2. Set borrowController of Market to FiRM BorrowController
  3. Set market supply ceiling to 10,000,000 DOLA
  4. Set daily limit in BorrowController to 1,000,000 DOLA
  5. Set Collateral Factor to 90%
  6. Set Liquidation Factor to 100%
  7. Set Liquidation Incentive to 5%
  8. Approve DOLA/sUSDe Yearn market on the DBR Helper
  9. Set Minimum Debt Amount in BorrowController to 3,000 DOLA
  10. Set stalenessThreshold for DOLA/sUSDe Yearn market to 86460
  11. Set FiRM Oracle price feed for DOLA/sUSDe Yearn to the deployed DOLA/sUSDe custom LP tokenPriceFeed contract
  12. Add DOLA/sUSDe Yearn Market to ALE
  13. Add DOLA/sUSDe Yearn Market to CurveDolaLPHelper