Author: Stake DAO Association — Curation Working Group
Summary
This proposal seeks to authorize the addition of a new Morpho lending market within the Stake DAO frxUSD v2 vault, using the Stake DAO frxUSD/sDOLA Curve LP token as collateral and frxUSD as the borrow asset.
Following a full two-phase due diligence under Stake DAO Association’s Market Risk Evaluation methodology, the collateral has been assigned an overall risk grade of B (3/6), making it eligible for listing in a High Yield vault. The proposed parameters are a supply cap of $250,000 and a LLTV of 86.0%.
Conflicts of Interest Disclosure
Stake DAO acts in multiple capacities in respect of this market: as the curator that performs the risk assessment and assigns the grade under SDGP-66; as the operator of the target Stake DAO frxUSD v2 MetaMorpho vault; and as the provider of the boosted LP wrapper used as collateral, from which it may derive fees. The Association has sought to apply the SDGP-66 methodology objectively notwithstanding these overlapping roles. Token holders should weigh this disclosure when voting.
Background
Inverse Finance’s sDOLA is a yield-bearing CDP stablecoin built on top of the DOLA Savings Account (DSA), an ERC-4626 vault that continuously streams DBR rewards to staked DOLA and auto-compounds them into additional DOLA. The frxUSD/sDOLA Curve StableSwap-NG pool pairs sDOLA against frxUSD and is currently deployed on Ethereum mainnet.
Stake DAO wraps liquidity provided into this pool into a boosted LP position (via sdCRV gauge boosts), exposing depositors to both pool trading fees and boosted CRV rewards.
The collateral under evaluation is the Stake DAO frxUSD/sDOLA LP token — i.e., a Stake DAO strategy vault token representing a boosted position in the underlying Curve pool. As frxUSD is the borrowed asset of the target vault, the due diligence assesses only the sDOLA leg of the pool.
Due Diligence Summary
The full risk assessment spreadsheet is available at:
Market Risk Evaluation — frxUSD/sDOLA
Pre-Assessment Screening (Phase I): PASS
All 13 filters passed. Noteworthy:
- Pool uses a StableSwap-NG design (no price_oracle() vulnerability).
- Pool TVL: ~$1.1m at time of assessment; lowest DOLA historical price on this pool: $0.985 (well within F10 tolerance).
- No single LP exceeds 45% (largest non-POL LP at ~31%).
Risk Assessment (Phase II)
| Layer | Grade |
|---|---|
| I. Asset Rating (sDOLA) | B |
| II. Platform Rating (Curve + Stake DAO) | S |
| III. Market Rating | B |
| Overall | B |
Red flags: 0
Note: “Red flags" denotes disqualifying findings under SDGP-66 and is distinct from the Points of Vigilance below, which are non-disqualifying matters warranting ongoing attention.
Layer I — Asset Rating: sDOLA
Pillar 1 — Issuer / Social
Inverse Finance operates as an on-chain DAO. A Cayman entity exists solely for administrative purposes (audit payments, contributor contracts) and holds no control over the protocol. The team has an established track record since its 2021 launch, with no known instances of user-fund mistreatment identified during due diligence.
Governance is fully on-chain via Governor Mills (similar to Compound/Curve governance). Nour Haridy (founder) is the only publicly identified contributor; the remaining ~5 core contributors operate pseudonymously.
Voting power distribution: team ex-Nour ~11.4%, Nour ~13.85%, community ~75%. Governance concentration is moderate but the team’s combined share (~25%) is insufficient to unilaterally pass proposals, particularly given active participation from large community holders (Temple, Bowman-poole, Chud, etc.) on contentious votes.
A dual-stage Governance Guardian is in place: Nour Haridy must first authorize cancellation, then a team multisig confirms it — which materially increases the difficulty of unauthorized proposal execution and mitigates (but does not eliminate) governance-attack risk.
Layer II — Platform Rating
Both platforms involved carry pre-existing ratings of S (5/6):
- Curve Finance — Blue-chip AMM infrastructure, immutable StableSwap-NG contracts.
- Stake DAO — Established yield aggregator/curator; Stake DAO LP contracts wrap Curve positions.
Layer III — Market Rating
The pool satisfies requirements of liquidity and volatility, as well as pool health and historic, to receive a B grade. DOLA is, based on available data, highly liquid, and the pool considered is small compared to the overall liquidity of the asset.
No price feed is required since the coin0 of the pool is frxUSD, the borrowed asset.
Risk Considerations and Points of Vigilance
The following points were identified during the due diligence and warrant ongoing attention by participants post-listing. Their inclusion creates no monitoring obligation on the part of the Association or its contributors (see Disclaimers): :
1. Lindy score will improve imminently
The Lindy reference date (20 Dec 2025, PSM redeploy) gives a score of 2/6 at the time of assessment. This is expected to improve to 3/6 on or around 20 June 2026 — the six-month anniversary of the 20 December 2025 PSM redeployment — when the six-month threshold is reached for the most recent risk-sensitive contract (the PSM). It by the way currently holds 0 DOLA minted and operates with a team-controlled (non-permissionless) mechanism, capped at 10M DOLA by governance vote. This was verified on-chain.
PSM contract 0x4dfd662622d766304cb539e66f893c4defa19398 shows 0 current exposure; max cap set at 0x400510611BcBf9171F0E548F1C3dcA7159e60d28.
2. Limited formal audit coverage
The yAudit (Jan 2024) covers only DolaSavings.sol, sDola.sol, and sDolaHelper.sol. The December 2025 PSM redeploy — which carries DOLA minting rights — has not undergone a formal external audit, though it benefited from multiple internal review layers (Immunefi Magnus peer review, contracted Wavey review, AI auditing tooling). These internal reviews are not a substitute for, and should not be treated as equivalent to, a formal external audit.
3. sDOLA “inflation attack” — not applicable on Morpho
The yAudit identified that sDOLA should not be used as borrowable collateral in lending markets where atomic donations can manipulate the oracle (Cream/Curve Lend-type attack).This risk is understood not to apply to Morpho. Inverse Finance’s risk lead has represented that, on Morpho, a donation to the sDOLA vault increases its fair value proportionally and creates no “borrow-more-than-collateral-is-worth” vector. The Curation Working Group has reviewed this analysis and concurs; however, it relies in part on representations of the issuer that the Association has not independently audited. The risk is specific to LLAMMA-type lending (where soft liquidation mechanics can be exploited). No oracle protection cap is needed here.
4. Young pool with high LP concentration
The frxUSD/sDOLA pool is approximately 2 months old. The top 5 LPs hold ~82% of pool TVL, and the largest non-POL LP holds ~31%. While the $250k cap represents approximately 23% of current pool TVL (~$1.1m as of 3/6/2026) and slippage tests pass comfortably, a coordinated exit by top LPs could reduce liquidation capacity. The cap should not be increased materially until the pool demonstrates greater depth and LP diversification.
5. DOLA minting governance risk — structural, partially mitigated
Another risk to DOLA is a governance attack enabling unbacked DOLA minting. This is structurally mitigated by: (i) dispersed voting power; (ii) economic impracticality of acquiring a majority on open markets; (iii) the dual-stage governance guardian. However, this structural risk should be re-evaluated if the voting power distribution changes materially (e.g., large OTC token sales etc.).
Proposed Market Parameters
| Parameter | Value |
|---|---|
| Vault | Stake DAO frxUSD v2 |
| Collateral | Stake DAO frxUSD/sDOLA Curve LP 0x2f010444C6a61feaEBCDd4040fA8B30F519e6c31 |
| Market ID | 0x1636d136f8f1e870b22a8df5f658e7558b4a7843e959a1915eb8ee8668c3132a |
| Borrow asset | frxUSD |
| LLTV | 86.0% |
| Supply cap | $250,000 |
| Oracle | Curve LP oracle (0 hops) |
The $250k cap seems appropriate given the pool’s youth and LP concentration. A cap review may be proposed once: (i) the Lindy score reaches 3/6 (expected ~mid-June 2026); (ii) pool TVL has grown and LP concentration has reduced; (iii) a formal audit of the PSM is completed.
On-Chain Actions
- Set supply cap for this market in the Stake DAO frxUSD v2 MetaMorpho vault:
- cap = 250,000 frxUSD
- Set collateral cap for this collateral in the Stake DAO frxUSD v2 MetaMorpho vault:
- cap = 250,000 frxUSD
References
- Risk Assessment Spreadsheet
- yAudit — sDOLA + DOLA Savings Account (Jan 2024)
- Inverse Finance Smart Contracts
- Inverse Finance Audits
- Inverse Finance Transparency Portal
- PSM Governance Proposal #343 — Redeploy DOLA Peg Stability Module (Dec 2025)
- PSM GitHub PR
LMAP Framework
| Parameter | Value |
|---|---|
| Forum debate period | 72 hours |
| Voting period | 72 hours |
| Debate and vote | Concurrent (debate and vote run in parallel) |
| Quorum | 15% of total vlSDT supply |
| Approval threshold | Simple majority (>50% of votes cast, excl. abstentions) |
| Anticipated execution | If super-quorum is reached |
Disclaimers
This proposal was prepared by the Stake DAO Association Curation Working Group in accordance with the Market Risk Evaluation Methodology (SDGP-66). It is provided for informational purposes only and on an “as is” basis.
No advice; no solicitation. Nothing in this proposal constitutes investment, financial, legal, tax, or accounting advice, a recommendation, or an offer or solicitation to buy, sell, or hold any token or to participate in any lending market. Each participant is solely responsible for its own due diligence and for ensuring its own compliance with all laws applicable to it, including securities, financial-services, tax, sanctions, and AML/CFT requirements in its jurisdiction.
Point-in-time assessment. All risk grades, parameters, and statements are made as of the assessment date and may change without notice. The assignment of a grade or the listing of a market is not an endorsement of any third-party protocol, token, or counterparty, and is not a representation as to the legal or regulatory characterisation (including under EU MiCA or any comparable regime) of any asset referenced herein.
No duty to monitor; no warranty. The points of vigilance identified in this proposal are provided for the benefit of participants and create no obligation on the part of the Association, the Curation Working Group, or any contributor to monitor, update, or intervene in any market. To the maximum extent permitted by law, the Association and its contributors disclaim all liability for any loss arising from reliance on this proposal. All deposits carry the risk of partial or total loss of funds.
Forward-looking statements. Statements regarding future events (including expected Lindy-score changes, audits, or pool growth) are estimates only; actual outcomes may differ materially.