👻Aave: Enable UMA as Collateral on v2/v3

Summary:

This proposal is for Aave to allow users to deposit UMA as collateral on Aave V2/V3 markets!

UMA was launched in December of 2018, and has an excellent reputation stands for ‘Universal market access’ and operates as a community-led optimistic oracle protocol. UMA protocol allows users to deploy and trade synthetic assets on-chain via optimistic oracles! (For more on UMA, read here:https://docs.umaproject.org/) At the time of writing, UMA has a market cap of $374,998,251 and a circulating supply of 65,194,016 tokens (106,076,668 total token supply). By owning UMA, users can contribute price information to UMA’s optimistic oracle (while earning rewards) and also contribute to protocol governance. UMA is currently listed on Coinbase and Binance, as well as other major decentralized exchanges!

Security Concerns:

The primary security concern here is that an individual could deposit UMA in Aave and then borrow more UMA from Aave to control 51% of the token supply. Hypothetically, this would allow that user to corrupt votes maliciously (i.e., voting to pay extract value from UMA treasury.).

With this in mind, it is proposed that users who want to borrow UMA can not use UMA as collateral to do so if UMA is added.

Token Audits:

• https://blog.openzeppelin.com/uma-audit-phase-1/

• https://blog.openzeppelin.com/uma-audit-phase-2/

• https://blog.openzeppelin.com/uma-audit-phase-3/

• https://blog.openzeppelin.com/uma-audit-phase-4/

UMA and Rabbithole share some common core values, which can be seen in UMA’s KPI (key performance indicators). UMA has developed smart contracts that reward participation as opposed to monetary contributions. This is very well aligned with Rabbithole core values!

Currently, there is no place for owners of UMA to deposit their tokens as collateral and borrow other assets against them. This means that, if passed, Aave will gain a ‘first movers advantage’ of being the primary protocol for UMA lending and borrowing.

Recommendation:

I recommend that the RH metagovernance pod vote Yes for UMA to be enabled as collateral on Aave V2/V3. UMA is already a well-established cryptocurrency, as can be seen by its listings across large centralized exchanges. Enabling UMA as collateral on Aave allows Aave to become the first and primary source for UMA lending and borrowing, giving them a ‘first mover advantage’! To the best of my knowledge, I do not see any immediate security threats in this implementation.

Proposal: https://snapshot.org/#/aave.eth/proposal/0x1d4f6d9f376761409669ce498889d688ddada33c87796b14d9d646aebd86dbdd

Aave Governance Forum:

https://governance.aave.com/t/listing-proposal-add-uma-as-collateral-on-aave/6196/11

Open Questions:

Feedback:

Execution Status: Executed

Vote: Yes

Community Vote

• 13 Y

• 0 N

Pod Vote

• 20 Y

• 1 N