Risk Parameter Updates for Aave v2 Ethereum - LTs and LTVs for Long Tail Assets
01Summary
Proposal to reduce risk parameters (Liquidation Threshold and Loan-To-Value) for four long-tail assets (ENS, MKR, SNX, and CRV) on Aave V2 Ethereum by up to 3% each, following community-approved Risk-Off Framework to mitigate protocol risk and encourage migration to V3.
- Type
- parameter change
Key changes
- Reduce Liquidation Threshold (LT) and Loan-To-Value (LTV) for ENS by up to 3%(medium)
- Reduce Liquidation Threshold (LT) and Loan-To-Value (LTV) for MKR by up to 3%(medium)
- Reduce Liquidation Threshold (LT) and Loan-To-Value (LTV) for SNX by up to 3%(medium)
- Reduce Liquidation Threshold (LT) and Loan-To-Value (LTV) for CRV by up to 3%(medium)
- Incremental decreases across eight total risk parameters following Risk-Off Framework(high)
Notable concerns
- Parameter reductions may trigger liquidations for existing positions; 7-day advance notice will be provided
- Incremental approach being used to minimize user impact
- Part of broader series of risk mitigation actions following market events (AIP-121, AIP-124, AIP-125)
Generated by Kvorum
02Description
Simple Summary
A proposal to adjust eight (8) total risk parameters, including Liquidation Threshold (LT) and Loan-To-Value (LTV), for four (4) assets on Aave V2 Ethereum.
Abstract
Following recent market events, the AAVE community has decided to reduce the risk profile across many higher volatile assets by disabling borrow or freezing across v2 markets (AIP-121, AIP-124, and AIP-125)
After mitigating the immediate risk to the protocol with the above AIPs, Chaos Labs is exploring the impact and trade-offs of decreasing the Liquidation Thresholds and LTVs of long-tail assets on Ethereum v2 (ENS, MKR, SNX, and CRV).
Motivation
Capital efficiency reductions on v2 assets will further mitigate attack vectors, in part by increasing the capital required to wage a price manipulation attack on Aave. In addition, these changes will act as an effective motivation to shift usage to v3, where users can enjoy the benefits of E-mode with enhanced risk techniques and mitigation methodologies.
As Liquidation Threshold reductions may lead to user accounts being eligible for liquidations upon their approval, we want to clarify the full implications to the community at each step. To best minimize this impact, we suggest reaching the desired settings by a series of incremental decreases, following the Risk-Off Framework previously approved by the community, with a reduction of up to 3% in any given AIP. In an attempt to avoid liquidations, Chaos Labs will communicate the planned amendments 7 days before their on-chain execution via all available avenues (Twitter, forums, Nansen Connect, and Blockscan Chat).
The respective data can be found in the governance forum discussion linked below:
- [ARC] - Risk Parameter Updates for Aave v2 Ethereum - LTs and LTVs for Long Tail Assets (2022.12.04)
Specification
The following risk parameter proposal is presented below:
*Data from Mainnet snapshot captured on December 15th, 2022, 14:30 GMT
Implementation
Payload implemendations can be found here
Proposal payload - 0x33d7385B2BF82b2183aFc66dC84EA5f3F2D240D5
Copyright
Copyright and related rights waived via CC0.
03Mismatch analysis
The proposal's on-chain footprint is a single generic call to execute() on the linked payload contract. This is the standard pattern for Aave governance proposals, where the substantive logic (setting LT/LTV values for ENS, MKR, SNX, CRV) lives inside the payload contract's bytecode and is only visible by reading its source, not from the decoded calldata provided here. Because the decoded action set contains no explicit parameter values, asset addresses, or numeric changes, I cannot directly verify whether the eight specific LT/LTV adjustments described in the prose match what the payload will do. There is no evidence of a mismatch — the single action target aligns with the payload address referenced in the description's Implementation section — but the lack of granular calldata means a rigorous line-by-line comparison of the described percentages against on-chain values is not possible from what's given. I am not flagging this as a discrepancy since the pattern is expected/routine for this proposal type, but confidence in the comparison is necessarily low due to insufficient calldata detail.
Generated by Kvorum
04Actions
- Target
- 0x33d7…40d5
- Value
- 0 wei
- Function
- fallback()
- Arguments
{}- Calldata
05Tally
Summed from votes
06Voters
No votes recorded yet.
07Forum
No forum thread is confidently linked to this proposal.
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