Remove USDS from sUSDe emode in Aave Prime instance - Review

diffs/AaveV3EthereumLido_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224_before_AaveV3EthereumLido_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224_after.md

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+## Emodes changed
+
+### EMode: ETH correlated(id: 1)
+
+
+
+### EMode: LRT Stablecoins main(id: 2)
+
+
+
+### EMode: LRT wstETH main(id: 3)
+
+
+
+### EMode: sUSDe Stablecoins(id: 4)
+
+| description | value before | value after |
+| --- | --- | --- |
+| eMode.label (unchanged) | sUSDe Stablecoins | sUSDe Stablecoins |
+| eMode.ltv (unchanged) | 90 % | 90 % |
+| eMode.liquidationThreshold (unchanged) | 92 % | 92 % |
+| eMode.liquidationBonus | 3 % | 4 % |
+| eMode.borrowableBitmap | USDS, USDC, GHO | USDC, GHO |
+| eMode.collateralBitmap (unchanged) | sUSDe | sUSDe |
+
+
+### EMode: rsETH LST main(id: 5)
+
+
+
+## Raw diff
+
+```json
+{
+  "eModes": {
+    "4": {
+      "borrowableBitmap": {
+        "from": "76",
+        "to": "72"
+      },
+      "liquidationBonus": {
+        "from": 10300,
+        "to": 10400
+      }
+    }
+  }
+}
+```

diffs/AaveV3Ethereum_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224_before_AaveV3Ethereum_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224_after.md

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+## Emodes changed
+
+### EMode: ETH correlated(id: 1)
+
+
+
+### EMode: sUSDe Stablecoins(id: 2)
+
+| description | value before | value after |
+| --- | --- | --- |
+| eMode.label (unchanged) | sUSDe Stablecoins | sUSDe Stablecoins |
+| eMode.ltv (unchanged) | 90 % | 90 % |
+| eMode.liquidationThreshold (unchanged) | 92 % | 92 % |
+| eMode.liquidationBonus | 3 % | 4 % |
+| eMode.borrowableBitmap (unchanged) | USDC, USDT, USDS | USDC, USDT, USDS |
+| eMode.collateralBitmap (unchanged) | sUSDe | sUSDe |
+
+
+### EMode: rsETH LST main(id: 3)
+
+
+
+## Raw diff
+
+```json
+{
+  "eModes": {
+    "2": {
+      "liquidationBonus": {
+        "from": 10300,
+        "to": 10400
+      }
+    }
+  }
+}
+```

src/20241224_Multi_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance/AaveV3EthereumLido_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224.sol

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+// SPDX-License-Identifier: MIT
+pragma solidity ^0.8.0;
+
+import {AaveV3EthereumLidoAssets, AaveV3EthereumLidoEModes} from 'aave-address-book/AaveV3EthereumLido.sol';
+import {AaveV3PayloadEthereumLido} from 'aave-helpers/src/v3-config-engine/AaveV3PayloadEthereumLido.sol';
+import {EngineFlags} from 'aave-v3-origin/contracts/extensions/v3-config-engine/EngineFlags.sol';
+import {IAaveV3ConfigEngine} from 'aave-v3-origin/contracts/extensions/v3-config-engine/IAaveV3ConfigEngine.sol';
+/**
+ * @title Proposal to Remove USDS from sUSDe Liquid E-Mode in Aave Prime Instance
+ * @author Aave-chan Initiative
+ * - Snapshot: https://snapshot.box/#/s:aave.eth/proposal/0x2be035a75fb8c5bb4e99e56006e57b7eb7df8bdd5616d903309ef6fc5b7446de
+ * - Discussion: https://governance.aave.com/t/arfc-proposal-to-remove-usds-from-susde-liquid-e-mode-in-aave-prime-instance/20264
+ */
+contract AaveV3EthereumLido_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224 is
+  AaveV3PayloadEthereumLido
+{
+  function eModeCategoriesUpdates()
+    public
+    pure
+    override
+    returns (IAaveV3ConfigEngine.EModeCategoryUpdate[] memory)
+  {
+    IAaveV3ConfigEngine.EModeCategoryUpdate[]
+      memory eModeUpdates = new IAaveV3ConfigEngine.EModeCategoryUpdate[](1);
+
+    eModeUpdates[0] = IAaveV3ConfigEngine.EModeCategoryUpdate({
+      eModeCategory: AaveV3EthereumLidoEModes.SUSDE_STABLECOINS,
+      ltv: EngineFlags.KEEP_CURRENT,
+      liqThreshold: EngineFlags.KEEP_CURRENT,
+      liqBonus: 4_00,
+      label: EngineFlags.KEEP_CURRENT_STRING
+    });
+
+    return eModeUpdates;
+  }
+  function assetsEModeUpdates()
+    public
+    pure
+    override
+    returns (IAaveV3ConfigEngine.AssetEModeUpdate[] memory)
+  {
+    IAaveV3ConfigEngine.AssetEModeUpdate[]
+      memory assetEModeUpdates = new IAaveV3ConfigEngine.AssetEModeUpdate[](1);
+
+    assetEModeUpdates[0] = IAaveV3ConfigEngine.AssetEModeUpdate({
+      asset: AaveV3EthereumLidoAssets.USDS_UNDERLYING,
+      eModeCategory: AaveV3EthereumLidoEModes.SUSDE_STABLECOINS,
+      borrowable: EngineFlags.DISABLED,
+      collateral: EngineFlags.KEEP_CURRENT
+    });
+
+    return assetEModeUpdates;
+  }
+}

src/20241224_Multi_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance/AaveV3EthereumLido_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224.t.sol

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+// SPDX-License-Identifier: MIT
+pragma solidity ^0.8.0;
+
+import {AaveV3EthereumLido} from 'aave-address-book/AaveV3EthereumLido.sol';
+
+import 'forge-std/Test.sol';
+import {ProtocolV3TestBase, ReserveConfig} from 'aave-helpers/src/ProtocolV3TestBase.sol';
+import {AaveV3EthereumLido_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224} from './AaveV3EthereumLido_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224.sol';
+
+/**
+ * @dev Test for AaveV3EthereumLido_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224
+ * command: FOUNDRY_PROFILE=mainnet forge test --match-path=src/20241224_Multi_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance/AaveV3EthereumLido_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224.t.sol -vv
+ */
+contract AaveV3EthereumLido_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224_Test is
+  ProtocolV3TestBase
+{
+  AaveV3EthereumLido_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224
+    internal proposal;
+
+  function setUp() public {
+    vm.createSelectFork(vm.rpcUrl('mainnet'), 21474028);
+    proposal = new AaveV3EthereumLido_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224();
+  }
+
+  /**
+   * @dev executes the generic test suite including e2e and config snapshots
+   */
+  function test_defaultProposalExecution() public {
+    defaultTest(
+      'AaveV3EthereumLido_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224',
+      AaveV3EthereumLido.POOL,
+      address(proposal)
+    );
+  }
+}

src/20241224_Multi_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance/AaveV3Ethereum_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224.sol

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+// SPDX-License-Identifier: MIT
+pragma solidity ^0.8.0;
+
+import {AaveV3EthereumEModes} from 'aave-address-book/AaveV3Ethereum.sol';
+import {AaveV3PayloadEthereum} from 'aave-helpers/src/v3-config-engine/AaveV3PayloadEthereum.sol';
+import {EngineFlags} from 'aave-v3-origin/contracts/extensions/v3-config-engine/EngineFlags.sol';
+import {IAaveV3ConfigEngine} from 'aave-v3-origin/contracts/extensions/v3-config-engine/IAaveV3ConfigEngine.sol';
+/**
+ * @title Proposal to Remove USDS from sUSDe Liquid E-Mode in Aave Prime Instance
+ * @author Aave-chan Initiative
+ * - Snapshot: https://snapshot.box/#/s:aave.eth/proposal/0x2be035a75fb8c5bb4e99e56006e57b7eb7df8bdd5616d903309ef6fc5b7446de
+ * - Discussion: https://governance.aave.com/t/arfc-proposal-to-remove-usds-from-susde-liquid-e-mode-in-aave-prime-instance/20264
+ */
+contract AaveV3Ethereum_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224 is
+  AaveV3PayloadEthereum
+{
+  function eModeCategoriesUpdates()
+    public
+    pure
+    override
+    returns (IAaveV3ConfigEngine.EModeCategoryUpdate[] memory)
+  {
+    IAaveV3ConfigEngine.EModeCategoryUpdate[]
+      memory eModeUpdates = new IAaveV3ConfigEngine.EModeCategoryUpdate[](1);
+
+    eModeUpdates[0] = IAaveV3ConfigEngine.EModeCategoryUpdate({
+      eModeCategory: AaveV3EthereumEModes.SUSDE_STABLECOINS,
+      ltv: EngineFlags.KEEP_CURRENT,
+      liqThreshold: EngineFlags.KEEP_CURRENT,
+      liqBonus: 4_00,
+      label: EngineFlags.KEEP_CURRENT_STRING
+    });
+
+    return eModeUpdates;
+  }
+}

src/20241224_Multi_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance/AaveV3Ethereum_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224.t.sol

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+// SPDX-License-Identifier: MIT
+pragma solidity ^0.8.0;
+
+import {AaveV3Ethereum} from 'aave-address-book/AaveV3Ethereum.sol';
+
+import 'forge-std/Test.sol';
+import {ProtocolV3TestBase, ReserveConfig} from 'aave-helpers/src/ProtocolV3TestBase.sol';
+import {AaveV3Ethereum_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224} from './AaveV3Ethereum_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224.sol';
+
+/**
+ * @dev Test for AaveV3Ethereum_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224
+ * command: FOUNDRY_PROFILE=mainnet forge test --match-path=src/20241224_Multi_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance/AaveV3Ethereum_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224.t.sol -vv
+ */
+contract AaveV3Ethereum_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224_Test is
+  ProtocolV3TestBase
+{
+  AaveV3Ethereum_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224
+    internal proposal;
+
+  function setUp() public {
+    vm.createSelectFork(vm.rpcUrl('mainnet'), 21474019);
+    proposal = new AaveV3Ethereum_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224();
+  }
+
+  /**
+   * @dev executes the generic test suite including e2e and config snapshots
+   */
+  function test_defaultProposalExecution() public {
+    defaultTest(
+      'AaveV3Ethereum_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224',
+      AaveV3Ethereum.POOL,
+      address(proposal)
+    );
+  }
+}

src/20241224_Multi_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance/ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance.md

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+---
+title: "Proposal to Remove USDS from sUSDe Liquid E-Mode in Aave Prime Instance"
+author: "Aave-chan Initiative"
+discussions: "https://governance.aave.com/t/arfc-proposal-to-remove-usds-from-susde-liquid-e-mode-in-aave-prime-instance/20264"
+snapshot: "https://snapshot.box/#/s:aave.eth/proposal/0x2be035a75fb8c5bb4e99e56006e57b7eb7df8bdd5616d903309ef6fc5b7446de"
+---
+
+## Simple Summary
+
+This proposal recommends the removal of USDS from the sUSDe Liquid E-Mode in the Aave Prime instance.
+
+## Motivation
+
+The sUSDe Liquid E-Mode was introduced to enhance capital efficiency for users by allowing higher loan-to-value (LTV) ratios when using sUSDe as collateral to borrow stablecoins like USDS. See [this proposal](https://governance.aave.com/t/arfc-onboard-and-enable-susde-liquid-e-mode-on-aave-v3-mainnet-and-lido-instance/19703) for more context.
+
+However, recent market observations have indicated increased borrow rates and potential liquidity mismatches involving USDS within this E-Mode. To address these concerns, this proposal suggests temporarily removing USDS from the sUSDe Liquid E-Mode in the Aave Prime instance.
+
+The primary motivations for this proposal are:
+
+1. **Risk Mitigation:** The inclusion of USDS in the sUSDe Liquid E-Mode has led to elevated borrow rates and potential liquidity mismatches.
+2. **Collateral Isolation:** Until a wrapper is available to isolate USDS collateral in the Prime instance, USDS remains the primary exposure. Removing it from the sUSDe Liquid E-Mode will help manage associated risks more effectively.
+3. **User Impact:** This change will not negatively impact existing user positions but will prevent the establishment of new ones involving USDS in the sUSDe Liquid E-Mode, thereby safeguarding current users while mitigating potential future risks.
+
+## Specification
+
+The proposed changes are as follows:
+
+- **Asset Removal:** Exclude USDS from the sUSDe Liquid E-Mode in the Aave Prime instance.
+- **Parameter Adjustments:** Update the E-Mode configuration to reflect the removal of USDS, ensuring alignment with the protocol’s risk management framework.
+- **Liquidation buffer improvement:**
+  echoing concerns from @LlamaRisk and other service providers, sUSDe emode on both Prime & Core instances are set to increase their buffer for liquidations.
+  - Increase Liquidation Bonus from 3 to 4% on e-modes on Core and Prime instances.
+
+Current ARFC will be reviewed by Risk Service Providers and their feedback will be included in the current ARFC.
+
+## References
+
+- Implementation: [AaveV3Ethereum](https://github.com/bgd-labs/aave-proposals-v3/blob/main/src/20241224_Multi_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance/AaveV3Ethereum_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224.sol), [AaveV3EthereumLido](https://github.com/bgd-labs/aave-proposals-v3/blob/main/src/20241224_Multi_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance/AaveV3EthereumLido_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224.sol)
+- Tests: [AaveV3Ethereum](https://github.com/bgd-labs/aave-proposals-v3/blob/main/src/20241224_Multi_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance/AaveV3Ethereum_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224.t.sol), [AaveV3EthereumLido](https://github.com/bgd-labs/aave-proposals-v3/blob/main/src/20241224_Multi_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance/AaveV3EthereumLido_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224.t.sol)
+- [Snapshot](https://snapshot.box/#/s:aave.eth/proposal/0x2be035a75fb8c5bb4e99e56006e57b7eb7df8bdd5616d903309ef6fc5b7446de)
+- [Discussion](https://governance.aave.com/t/arfc-proposal-to-remove-usds-from-susde-liquid-e-mode-in-aave-prime-instance/20264)
+
+## Copyright
+
+Copyright and related rights waived via [CC0](https://creativecommons.org/publicdomain/zero/1.0/).

src/20241224_Multi_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance/ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224.s.sol

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+// SPDX-License-Identifier: MIT
+pragma solidity ^0.8.0;
+
+import {GovV3Helpers, IPayloadsControllerCore, PayloadsControllerUtils} from 'aave-helpers/src/GovV3Helpers.sol';
+import {GovernanceV3Ethereum} from 'aave-address-book/GovernanceV3Ethereum.sol';
+import {EthereumScript} from 'solidity-utils/contracts/utils/ScriptUtils.sol';
+import {AaveV3Ethereum_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224} from './AaveV3Ethereum_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224.sol';
+import {AaveV3EthereumLido_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224} from './AaveV3EthereumLido_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224.sol';
+
+/**
+ * @dev Deploy Ethereum
+ * deploy-command: make deploy-ledger contract=src/20241224_Multi_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance/ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224.s.sol:DeployEthereum chain=mainnet
+ * verify-command: FOUNDRY_PROFILE=mainnet npx catapulta-verify -b broadcast/ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224.s.sol/1/run-latest.json
+ */
+contract DeployEthereum is EthereumScript {
+  function run() external broadcast {
+    // deploy payloads
+    address payload0 = GovV3Helpers.deployDeterministic(
+      type(AaveV3Ethereum_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224)
+        .creationCode
+    );
+    address payload1 = GovV3Helpers.deployDeterministic(
+      type(AaveV3EthereumLido_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224)
+        .creationCode
+    );
+
+    // compose action
+    IPayloadsControllerCore.ExecutionAction[]
+      memory actions = new IPayloadsControllerCore.ExecutionAction[](2);
+    actions[0] = GovV3Helpers.buildAction(payload0);
+    actions[1] = GovV3Helpers.buildAction(payload1);
+
+    // register action at payloadsController
+    GovV3Helpers.createPayload(actions);
+  }
+}
+
+/**
+ * @dev Create Proposal
+ * command: make deploy-ledger contract=src/20241224_Multi_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance/ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224.s.sol:CreateProposal chain=mainnet
+ */
+contract CreateProposal is EthereumScript {
+  function run() external {
+    // create payloads
+    PayloadsControllerUtils.Payload[] memory payloads = new PayloadsControllerUtils.Payload[](1);
+
+    // compose actions for validation
+    IPayloadsControllerCore.ExecutionAction[]
+      memory actionsEthereum = new IPayloadsControllerCore.ExecutionAction[](2);
+    actionsEthereum[0] = GovV3Helpers.buildAction(
+      type(AaveV3Ethereum_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224)
+        .creationCode
+    );
+    actionsEthereum[1] = GovV3Helpers.buildAction(
+      type(AaveV3EthereumLido_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance_20241224)
+        .creationCode
+    );
+    payloads[0] = GovV3Helpers.buildMainnetPayload(vm, actionsEthereum);
+
+    // create proposal
+    vm.startBroadcast();
+    GovV3Helpers.createProposal(
+      vm,
+      payloads,
+      GovernanceV3Ethereum.VOTING_PORTAL_ETH_POL,
+      GovV3Helpers.ipfsHashFile(
+        vm,
+        'src/20241224_Multi_ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance/ProposalToRemoveUSDSFromSUSDeLiquidEModeInAavePrimeInstance.md'
+      )
+    );
+  }
+}