LlamaRisk on Sept. 9 proposed increasing the base variable borrow rate for Ethena’s USDe to 6% across five Aave V3 markets: Core, Plasma, Monad, Mantle, and Avalanche.

The recommendation would raise USDe’s base variable borrow rate from 5% to 6% on the five named Aave V3 deployments. At the same time, LlamaRisk proposed reducing Slope1 by one percentage point on each market, creating a mixed effect in which the higher base rate lifts borrowing costs while the lower slope softens part of that increase.

According to the proposal, modeled borrower APRs at current utilization levels would rise by 13 to 89 basis points across markets that hold about 323.8 million USDe debt against 1.18 billion supplied. The impact is uneven because each market has different utilization. Avalanche, described as the highest-utilization market, would see the smallest increase at 13 basis points, while Mantle, the lowest-utilization market, would absorb nearly the full base-rate increase.

The change is aimed at positions that borrow USDe and recycle it into yield-bearing sUSDe. That structure has been an important source of supply, but it also depends on the spread between borrowing costs and the return available on sUSDe. LlamaRisk said unwinding some of that loop-funded supply could lift yields for remaining sUSDe holders toward 5.3%.

As of Sept. 10, an Aavescan snapshot showed a 4.72% supply APY for sUSDe. The original proposal said USDe borrow APRs were already above that level in several markets before accounting for incentives and transaction costs, leaving borrowers in a negative carry setup. That makes the governance proposal less about expanding usage and more about changing the economics of leveraged yield strategies built on top of Aave and Ethena.

Why It Matters

This proposal matters because it targets a specific DeFi market structure trade rather than a simple interest-rate tweak. USDe borrowing on Aave has been tied to leveraged sUSDe strategies, so changing the rate model can affect how much balance-sheet demand remains in those markets and how supply is distributed across Aave deployments.

It also shows how risk managers are using parameter changes to respond when stablecoin carry becomes less attractive. For Aave, that means adjusting utilization incentives without shutting markets down. For Ethena-linked positions, it means the sustainability of on-chain yield may depend less on aggressive looping and more on whether organic demand remains after funding conditions tighten.