Generalized LT/LTV Reduction on Aave
01Summary
Reduce Loan-to-Value (LTV) and Liquidation Threshold (LT) parameters for stablecoin collateral across 9 blockchains (Ethereum, Polygon, Arbitrum, Optimism, Avalanche, Base, BNBChain, Gnosis, Scroll) to mitigate volatility risks and prevent short squeezes, with typical reductions of 1-2.5% across USDC, USDT, DAI, and related wrapped variants.
- Type
- parameter change
Key changes
- USDC LTV reduced from 77% to 76% on Ethereum, Polygon, BNBChain, Base, Scroll; from 82.5% to 80% on Avalanche; from 80% to 78% on Optimism (USDC.e)(medium)
- USDT LTV reduced from 77% to 76% on Ethereum, Arbitrum, Polygon, BNBChain, Optimism; from 77% to 75% on Avalanche(medium)
- DAI LTV reduced from 77% to 76% on Ethereum, Arbitrum; from 78% to 75% on Optimism; LTV parameter removed on Avalanche and Polygon(medium)
- Liquidation Thresholds (LT) reduced by 1-3% across all stablecoins on all chains to strengthen collateral safety margins(medium)
- Wrapped stablecoin variants (sDAI, USDC.e, USDbC, xDAI) subject to same LTV and LT reductions as primary stablecoin counterparts(low)
Notable concerns
- Proposal is motivated by volatility risks from other protocols (Compound UNI incident) but Aave states it does not employ the same flawed oracle logic
- Low utilization rates of stablecoins as collateral (2.4-5.8%) indicate minimal revenue generation relative to theoretical risks
- Subsequent recommendations for borrow cap reductions on long-tailed assets are mentioned but not included in this proposal
Generated by Kvorum
02Description
Simple Summary
Reduce stablecoin LTs and LTVs across all markets.
Motivation
In response to the volatility risks highlighted by the UNI incident on Compound, this proposal aims to mitigate theoretical debt asset volatility by proposing a reduction in collateral asset borrowing power for stablecoins. While the UNI debacle was attributed to inadequate dual-bounded fallback oracle logic, a property not employed by Aave, leading to mispriced UNI debt and subsequent arbitrage activities, the observed upward volatility in longer-tailed assets suggests a prevailing “risk-on” market sentiment. Therefore, we advocate for minimizing borrowing power concerning shorting these assets to prevent potential short squeezes and liquidation shortfalls. Subsequent recommendations will address borrow cap reductions for relevant long-tailed assets, which generate minimal revenue relative to the theoretical risks, especially in edge-case scenarios. Additionally, presently only 2.4%, 3.7% and 5.8% of supplied DAI, USDT and USDC on Ethereum are being utilized as collateral, indicating the generalized lack of demand (and thus revenue).
Specification
| Assets | Chain | Current LT | Recommended LT | Current LTV | Recommended LTV |
|---|---|---|---|---|---|
| USDC | Arbitrum | 80% | 79% | 77% | 76% |
| USDT | Arbitrum | 80% | 79% | 77% | 76% |
| DAI | Arbitrum | 82% | 79% | 77% | 76% |
| USDC.e | Arbitrum | 80% | 79% | 77% | 76% |
| USDC | Avalanche | 86.25% | 85% | 82.5% | 80% |
| USDT | Avalanche | 80% | 78% | 77% | 75% |
| DAI | Avalanche | 82% | 80% | 75% | - |
| USDC | BNBChain | 80% | 79% | 77% | 76% |
| USDT | BNBChain | 80% | 79% | 77% | 76% |
| USDC | Base | 80% | 79% | 77% | 76% |
| USDbC | Base | 80% | 79% | 77% | 76% |
| USDC | Ethereum | 80% | 79% | 77% | 76% |
| USDT | Ethereum | 80% | 79% | 77% | 76% |
| DAI | Ethereum | 80% | 79% | 77% | 76% |
| sDAI | Ethereum | 80% | 79% | 77% | 76% |
| USDC | Gnosis | 80% | 79% | 77% | 76% |
| sDAI | Gnosis | 80% | 79% | 77% | 76% |
| xDAI | Gnosis | 80% | 79% | 77% | 76% |
| USDC | Optimism | 80% | 79% | 77% | 76% |
| USDT | Optimism | 80% | 79% | 77% | 76% |
| USDC.e | Optimism | 85% | 84% | 80% | 78% |
| DAI | Optimism | 83% | 80% | 78% | 75% |
| USDC | Polygon | 80% | 79% | 77% | 76% |
| USDT | Polygon | 80% | 79% | 77% | 76% |
| DAI | Polygon | 81% | 79% | 76% | - |
| USDC.e | Polygon | 80% | 79% | 77% | 76% |
| USDC | Scroll | 80% | 79% | 77% | 76% |
References
- Implementation: AaveV3Ethereum, AaveV3Polygon, AaveV3Avalanche, AaveV3Optimism, AaveV3Arbitrum, AaveV3Base, AaveV3Gnosis, AaveV3BNB, AaveV3Scroll
- Tests: AaveV3Ethereum, AaveV3Polygon, AaveV3Avalanche, AaveV3Optimism, AaveV3Arbitrum, AaveV3Base, AaveV3Gnosis, AaveV3BNB, AaveV3Scroll
- Snapshot
- Discussion
Copyright
Copyright and related rights waived via CC0.
03Mismatch analysis
The proposal description provides a detailed, specific table of Liquidation Threshold (LT) and Loan-to-Value (LTV) reductions across 11 chains and ~27 reserve assets. However, the decoded on-chain action set contains only a single generic entry: a call to execute() (fallback) on a payload contract address on Ethereum, with no decoded arguments. This is consistent with the standard Aave governance pattern where a single governance-executed payload contract internally performs the many PoolConfigurator.setLiquidationThreshold/setLtv calls described in the proposal (and potentially triggers cross-chain execution via bridge adapters), but those internal calls are not surfaced in this decoded calldata. Because the decoded action carries no parameters (asset addresses, LT/LTV values, or target chains), it is not possible to verify whether the payload's internal logic actually matches each specific percentage change listed in the specification table. I found no evidence of contradiction (no mismatched value, wrong target, or omitted/extra action can be confirmed), but I also cannot positively confirm the granular claims because the calldata lacks the necessary detail. This is a common and expected pattern for Aave-style multi-chain payload proposals, so I do not flag it as a discrepancy, but confidence is marked low since a full line-by-line verification of the ~27 parameter changes against the calldata is not possible from the single decoded execute() call provided.parameters.
Generated by Kvorum
04Actions
- Target
- 0xd562…d042
- Value
- 0 wei
- Function
- fallback()
- Arguments
{}- Calldata
05Tally
Summed from votes
06Voters
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07Forum
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