Gray retweetledi
Live evidence for the @aave x @KelpDAO x @LayerZero_Core governance war room on second-order risk.
@avantprotocol is currently running a single $156M sUSDe looping position on Aave Mantle.
$140M USDT0 + $20M USDC borrowed against it.
Net APY -135% (net of sUSDe embedded yield the pain is less, but still deeply negative). Health factor 1.02. Borrow power 100%.
This isn’t a rounding error. It’s one of the largest single positions on @Mantle_Official, sitting at liquidation threshold, eating deep negative carry, structurally dependent on Aave Mantle staying unfrozen indefinitely.
Under the L1-backstop / L2-zeroed proposal, forced unwinds of positions like this are the transmission vector back to Core via sUSDe depeg pressure on thin L2 secondary liquidity.
You can believe this position is fine in isolation.
You cannot believe this position is fine in isolation AND that L2 zeroing has no second-order cost to stakeholders like @avantprotocol. Pick one.
More quants, fewer lawyers in the war room, for the sake of this industry. 🫡
D2 Finance@D2_Finance
@aave @StaniKulechov One modeling angle worth stress-testing before the L1-full-backstop / L2-zeroed proposal goes to vote: Second-order effects. @Mantle_Official carries material @ethena USDT exposure. A haircut to Ethena from L2 zeroing could push USDe collateral on Core to reprice, looping the exact contagion the plan was meant to contain. @gdog97_ what’s your read on this path? L2 zeroing isn’t a free option. It has quantifiable cost paths back to the market you’re trying to protect. Setting aside the moral one, this is also a modeling problem, not a legal one. More quants, fewer lawyers.
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