Aave Labs said on 21 October that governance proposal 535 had been created to onboard Ethena's USDe to the Aave V4 Core instance on Avalanche. The vote was due to begin within 24 hours of the announcement.

The new proposal replaces proposal 532, which Aave Labs said was cancelled on 19 October. Recreating the vote does not mean the listing is approved or live. Final governance approval and on-chain execution remain necessary.

Collateral only, with a 60 million USDe ceiling

LlamaRisk's recommended configuration would place USDe in a new Ethena Ecosystem Spoke. USDe would be accepted as collateral but could not be borrowed. The proposed add cap is 60 million USDe and the draw cap is zero.

The risk provider recommended a 93% collateral factor and a 2% maximum liquidation bonus. It also proposed using a capped USDT/USD price feed rather than the USDe/USD feed, consistent with its treatment of USDe-related assets in other Aave markets.

The Avalanche token is bridged, not natively issued

USDe cannot be minted natively on Avalanche. According to the assessment, canonical USDe is escrowed on Ethereum and the Avalanche token is minted and burned through LayerZero's Omnichain Fungible Token system. The Avalanche route currently peers only with Ethereum, so disruption to that pathway would leave no alternative bridge route.

LlamaRisk also identified concentrated exit liquidity. Its 14 September assessment found about $0.5 million in the principal USDe/USDC pool on Avalanche, with a single externally owned account supplying all of that pool's liquidity. The provider cited this concentration when recommending conservative limits and collateral-only treatment.

Administrative controls add another risk layer

The Avalanche USDe contract is governed through a 24-hour timelock, but the issuer's 5-of-10 multisignature wallet can call the setPeer function without waiting. That can help sever a compromised route quickly, but the same authority could also add or redirect a peer immediately. LlamaRisk said there is no separate pauser mechanism.

NetNapz assessment

Assessment: proposal 535 is best read as a constrained experiment, not a broad endorsement of USDe liquidity on Avalanche. Disabling borrowing removes one source of demand and limits the new market to collateral use, while the add cap restricts exposure. Those controls do not remove the underlying bridge, administrator, backing and exit-liquidity risks.

For AAVE holders, the near-term milestone is the governance result, followed by verified execution. The commercial test would come later: deposits, borrowing against the collateral, liquidations and fee generation would need to demonstrate durable use. None of those outcomes is established by creation of the vote.

Sources and limits

Aave Labs proposal thread, including the 19 October cancellation and 21 October recreation update; LlamaRisk's USDe on Avalanche assessment. Both were checked on 21 October 2026. Numeric liquidity and backing figures are dated 14 September in the assessment and are not presented as current market levels. NetNapz did not independently execute contract calls or confirm that proposal 535 had opened for voting at publication time.