LMAP-4: Enable the new Stake DAO frxUSD/crvUSD, 91.5% LTV Curve LP Market as Collateral in the Stake DAO frxUSD v2 Vault

Lending Market Adjustment Proposal (LMAP)
1
Author: Stake DAO Association
Date: July 2026
Forum debate: 3 days (concurrent with vote)
Voting period: 3 days | Quorum: 15% vlSDT | Simple majority

Summary

This Lending Market Adjustment Proposal (LMAP) seeks governance authorization to enable a new collateral market in the Stake DAO frxUSD v2 curated vault on Morpho: the Stake DAO boosted Curve frxUSD/crvUSD LP token, with an LLTV of 91.5% and an initial supply cap of 3,000,000 frxUSD.

The proposal also asks governance to ratify one explicit methodology adjustment: setting aside the LP concentration criterion for this specific market, for the reasons detailed in the Risk Assessment section. With this adjustment the collateral obtains a final grade of B, eligible for high yield vaults under the Stake DAO market risk methodology. Without it, the mechanical grade is C.

The full due diligence analysis is available here: Market risk evaluation - frxUSD/crvUSD

Context

Under SDGP-66 (Category D), all parameter adjustments to Stake DAO’s curated Morpho vaults, including enabling new collateral markets, are governed through the LMAP process.

The Stake DAO frxUSD v2 vault lends frxUSD against curated collateral markets. This proposal adds a market collateralized by the Stake DAO boosted strategy on the Curve frxUSD/crvUSD pool (StableSwap-NG), allowing Curve LPs to borrow frxUSD against their staked LP position and enabling looping strategies that deepen frxUSD liquidity, in line with the strategy outlined in SDGP-58.

About the collateral

The collateral is the Stake DAO ERC-4626 vault token representing a staked position in the Curve frxUSD/crvUSD pool (Ethereum mainnet, StableSwap-NG, A = 2000, pool TVL ~$12.0M, ~150 trades per day on average over the trailing 30 days). Since the loan asset frxUSD is one of the two pool components, the asset assessed under Layer I of the methodology is crvUSD.

crvUSD is the CDP stablecoin of Curve Finance, live since May 2023, with a circulating supply of ~$209M. It is minted against overcollateralized positions (WBTC, WETH, wstETH, tBTC, sfrxETH, weETH, cbBTC and LBTC mint markets) through the immutable LLAMMA soft liquidation architecture, supplemented by PegKeepers and, since September 2025, a DAO-approved credit line to YieldBasis. Full criterion-by-criterion scoring is available in the published Market Risk Evaluation sheet (see References).

Conflicts of interest

Stake DAO Association authors this proposal and, in relation to this market, simultaneously acts as curator of the target vault, as operator of the Stake DAO frxUSD v2 vault, as provider of the boosted Curve LP wrapper used as collateral, and as the entity that would execute the on-chain change if this proposal passes. The SDGP-66 market risk methodology has therefore been applied by the Association to its own product, and the concentration-criterion adjustment requested below is a discretionary deviation proposed by the same party that stands to benefit from the market’s activation. No independent third-party risk review was obtained for this assessment. vlSDT holders should weigh these overlapping roles, and the absence of an independent review, when deciding how to vote.

Risk assessment

Assessment performed on July 16, 2026 under the Stake DAO market risk methodology (three layers, grade = worst layer, adjusted for red flags).

Layer Grade
Asset rating (crvUSD) 3 (B)
Platform rating (Curve, Stake DAO, Morpho) 5 (S)
Market rating 4 (A), after the concentration adjustment below
Red flags 0
Final grade B (C without the concentration adjustment)

Asset rating highlights: the crvUSD token contract is immutable with no pause, freeze or blacklist function, and supply changes require a 7-day public Curve DAO vote needing several independent large veCRV holders (Admin capabilities 3). The instant-acting Emergency DAO (5-of-9) is restricted on-chain to risk-reducing actions. Bridge exposure is de minimis (~1.1% of circulating supply, no EOA-owned bridge). The full current stack is covered by one tier 1 audit (ChainSecurity cumulative assessment, Feb 2025) on top of immutable core contracts audited by three firms since 2023 (Audits 3). The last structural change retained for Lindy purposes is the YieldBasis credit line extension to 1B crvUSD (Dec 12, 2025, Lindy 3). Details and watch items are in the Annex.

Concentration criterion adjustment (governance ratification requested)

The raw pool concentration figures (largest LP ~39% and top 5 LPs ~70% of the pool, excluding protocol-owned liquidity) score 2 under the methodology grid, which would mechanically cap the final grade at C. Outside this single criterion, the market scores strongly (grade A at Layer III).

The purpose of the concentration criterion is to protect against the impossibility of performing liquidations if dominant LPs withdraw. For this specific market we assess that risk as low, because the frxUSD/crvUSD pool is a small secondary venue for both of its components: crvUSD holds ~$49M of exit liquidity outside this pool and frxUSD has similarly deep venues. A withdrawal by the largest LPs, even a full unbalanced withdrawal, would not impair liquidations: the LP collateral can be unwound through a balanced withdrawal and the resulting crvUSD sold in other pools with negligible slippage at the proposed cap (0.07% measured for a swap of 100% of the cap). The liquidation path does not depend on this pool’s depth.

We therefore propose, with explicit governance approval, to set aside the concentration criterion for this market only, which yields a final grade of B. This adjustment is specific to this market and this assessment; it does not amend the SDGP-66 methodology and does not constitute a precedent for any other market or future proposal. The criterion remains monitored: if crvUSD or frxUSD secondary liquidity deteriorates to the point where this pool becomes a primary venue, the waiver rationale lapses and a re-assessment LMAP will be submitted (see Monitoring).

Market specifications

Parameter Value
Vault Stake DAO frxUSD v2
Loan asset frxUSD
Collateral asset Stake DAO boosted Curve frxUSD/crvUSD LP, 0x728c3B9Eb722F7aFC17F0D26A80d625C53059086
Morpho market ID 0x35c92b233f962d894b5558063c926aa44fab0a5178a176211543a63039edd328
LLTV 91.5%
Initial supply cap 3,000,000 frxUSD (~25% of pool TVL)
Oracle LP pricing via the pool’s internal accounting (0 external hops; coin0 is the loan asset), donation-attack resistant (StableSwap-NG)
Screening Phase I pre-assessment: PASS (13/13 filters)

Monitoring and re-assessment triggers

Stake DAO Association intends to monitor this market and, on a best-efforts basis, to submit a re-assessment LMAP if any of the following thresholds is observed (these thresholds are internal review triggers only and do not create a monitoring duty, a guarantee, or any other legal obligation owed to any person): pool TVL below $5M for 14 consecutive days; trade frequency below 5 trades per day for 14 consecutive days; crvUSD or frxUSD depeg beyond 2% for more than 24 hours; crvUSD exit liquidity outside this pool falling below 5x the market’s supply cap (~$15M); any material increase in YieldBasis credit line utilization or any deployment of unaudited YieldBasis contracts holding credit-line crvUSD; any Curve DAO vote materially extending Emergency DAO powers or adding an uncollateralized crvUSD minting pathway. A downgrade to C is intended to trigger the 30-day re-evaluation policy, and a downgrade to D to prompt governance review and a proposal to suspend new deposits; these are internal governance processes rather than guarantees of any particular action, outcome, or timing.

Risk acknowledgement

Lending market parameter adjustments may materially impact risk exposure, liquidation thresholds, and user positions. Participants acknowledge that such decisions involve financial risk and are made on a best-effort basis without guarantees of performance or safety.

crvUSD is a CDP stablecoin whose supply is governed by Curve DAO votes, including a credit line to YieldBasis approved up to 1B crvUSD in December 2025. crvUSD’s supply, peg stability, and risk parameters are determined by Curve DAO governance and third parties (including YieldBasis) over which the Stake DAO Association has no control and for which it accepts no responsibility. The final grade of B for this market depends on a governance-approved adjustment of the LP concentration criterion, as described above. Without that adjustment the mechanical grade is C. This proposal does not constitute financial, legal, or investment advice.

For the avoidance of doubt: this proposal is provided for informational purposes only and on an “as is” basis. It is not, and must not be relied upon as, financial, legal, investment, tax, or accounting advice, nor as a solicitation, recommendation, or offer to buy, sell, or hold any token, security, or other financial instrument. The market risk grade is the point-in-time output of Stake DAO’s internal methodology and is not an assurance of safety, solvency, or future performance; all grades and parameters may change without notice. Any forward-looking statements, including as to liquidity, looping demand, or pool growth, are estimates only and are not guarantees. Interacting with this market may result in the partial or total loss of deposited funds. Nothing in this proposal creates a fiduciary relationship, a duty of care, or any ongoing monitoring or support obligation on the part of the Stake DAO Association or its contributors toward any participant, and participation is undertaken at each participant’s own risk.

Limitation of liability

To the maximum extent permitted by applicable law, the Stake DAO Association and its council members, contributors, agents and service providers (together, the “Association Parties”) shall have no liability whatsoever for any loss or damage of any kind — whether direct, indirect, incidental, special, consequential, punitive or exemplary, including loss of funds, profits, or opportunity — arising out of or in connection with this proposal, the market risk assessment, the enabling, parameters or operation of the market, or any reliance on any statement contained herein, even if an Association Party has been advised of the possibility of such loss. No representation or warranty of any kind, express or implied, is given as to the accuracy, completeness, merchantability, fitness for a particular purpose, safety, solvency, or future performance of the market or its collateral, all of which are provided on an “as is” and “as available” basis.

The assessment, grades and scores set out in this proposal are opinions formed in good faith on the basis of information available and believed to be reliable as of the assessment date; they are not warranties or statements of fact, are not independently guaranteed, and may be incomplete or change without notice. Each participant is solely responsible for conducting its own due diligence and bears full responsibility for its own decisions and positions. The decision to enable this market is taken by vlSDT holders through the governance vote; the Association prepares and submits this analysis and, if the proposal is approved, implements the resulting collective governance decision. By participating in the market, each participant accepts and assumes these risks and agrees to the limitations set out above.

Vote

For (Yes): Enable the sd-frxUSD/crvUSD collateral market (LLTV 91.5%, initial cap 3,000,000 frxUSD) in the Stake DAO frxUSD v2 vault, and ratify the concentration criterion adjustment for this market as described.

Against (No): Reject the market addition.

Abstain: Take no position on this proposal.

References

This proposal follows the Stake DAO Governance Framework (SDGP-66).

Annex: Assessment notes

The following points summarize the key analytical judgments behind the scoring, for transparency towards governance participants. All on-chain statements were verified in July 2026 unless noted.

A1. Admin capabilities (score 3)

The crvUSD token contract (0xf939E0A03FB07f59A73314E73794Be0E57ac1b4E) is immutable: no pause, freeze, blacklist or upgrade function exists, and the minter role is permanently locked to the ControllerFactory (complete SetMinter event history verified, unchanged since May 14, 2023). Supply control exists only at system level: the Curve DAO can mint or burn crvUSD without hardcoded cap via set_debt_ceiling, but execution requires a full 7-day Aragon vote (30% veCRV quorum, 51% support) that is publicly visible throughout, and reaching quorum requires several independent large veCRV holders. Since vote #1252 (executed Nov 11, 2025), the factory admin is a DualAdmin proxy under which the Emergency DAO (5-of-9 Safe) can act instantly but only in risk-reducing ways (reduce debt ceilings, swap monetary policy, adjust fees and discounts); it cannot mint, increase ceilings, freeze or add markets. This maps to “Mint/burn/freeze with timelock and several parties needed for execution” (3).

A2. Bridge risk (score 3)

crvUSD is mintable only on Ethereum. Bridged supply is ~2.4M crvUSD (~1.1% of circulating supply, verified via mainnet escrow balances). Three bridge families: canonical rollup bridges (~99% of bridged supply, no Curve-privileged role), Curve x-dao LayerZero bridges (negligible supply, owned by the Curve DAO ownership agent with kill-only Emergency DAO powers), and the rate-limited crvUSD FastBridge. No EOA owner was found on any bridge contract. No bridge exploit since launch; Curve preventively halted its LayerZero bridges in April 2026 after the Kelp rsETH incident and later resumed, demonstrating that the kill switch works in practice. Scored 3 under the strict reading (“several native bridges with correct owners”), given the multiplicity of bridge deployments despite correct ownership everywhere.

A3. Audits (score 3)

The counting rule requires audits covering the full current scope. Only the ChainSecurity cumulative assessment of Feb 21, 2025 qualifies (tier 1; 20 contract files across 15 code versions: token, factory, controllers, LLAMMA, monetary policies, oracles, PegKeeper V1/V2, Regulator, lending factories, FlashLender; 66 findings, all critical and high corrected). Earlier full-stack audits (MixBytes 2023, Statemind 2023) predate PegKeeperV2 and the FlashLender; component audits are partial-scope. Core contracts are immutable since May 2023, which keeps the assessment valid. Known gap: the crvUSD-to-YieldBasis credit line wiring and anything deployed after Feb 15, 2025 sit outside published audit scope.

A4. Lindy (score 3) and the YieldBasis question

Core crvUSD contracts are unchanged since May 2023 and the last mint-market collateral was added on March 10, 2025 (weETH, cbBTC, LBTC). The security perimeter has however evolved: YieldBasis credit line created Sep 24, 2025 and extended to 1B crvUSD on Dec 12, 2025; Emergency DAO powers extension Nov 11, 2025; GHO PegKeeper onboarded Mar 13, 2026; GHO removed from the aggregated price oracle Apr 28, 2026. The event retained for Lindy is the credit line extension to 1B (Dec 12, 2025, 7.1 months, score 3), as the most material standing change to how crvUSD can be issued. LlamaRisk documented increased peg volatility since YieldBasis flows began, and the YieldBasis leverage loop sells crvUSD during market crashes, precisely when the peg is under pressure. Mitigants: utilization is ramped gradually and capped well below the approved ceiling, and the Emergency DAO can cut the credit line to zero instantly. The YieldBasis V3 rework (announced late May 2026, no published audit found) and credit line utilization are tracked as monitoring triggers rather than counted in Lindy, since the exposure is capped and instantly reducible.

A5. Peer reviews (score at the C/B boundary)

No curator from the reference list currently accepts crvUSD directly as collateral on a major lending venue: Aave lists crvUSD but with collateral disabled, Morpho crvUSD-collateral markets are marginal and not attributable to reference curators, and other venues use crvUSD on the loan side (LlamaLend, Resupply, Morpho loan markets). Inverse Finance accepts a Curve LP containing scrvUSD on FiRM (announced Dec 2024), which counts as indirect acceptance of the crvUSD stack by one reference curator. The peer signal is therefore weak, which is reflected in the assessment and compensated by the conservative cap and monitoring commitments.

A6. Concentration criterion

Raw figures: largest LP ~39%, top 5 ~70% (excluding POL). The waiver rationale is developed in the main body. Note for transparency: the criterion is set aside, not re-scored; the published sheet retains the raw measurements, and the adjustment applies only to this market and this assessment.

A7. Liquidation path

At the proposed cap, liquidating 100% of the market through a balanced LP withdrawal and sale of the crvUSD leg in external pools was measured at 0.07% slippage, against an 8.5% liquidation margin (LLTV 91.5%). crvUSD exit liquidity outside the collateral pool is ~$49M, roughly 16x the proposed cap.