Liquidation Bonus Updates for eleven Aave V2 assets
01Summary
Reduce liquidation bonuses for 11 Aave V2 assets (WBTC, REN, BAT, YFI, MKR, ZRX, CRV, XSUSHI, AAVE, MANA, SNX) to optimize risk parameters and improve outcomes for liquidated users, building on learnings from previous liquidation bonus adjustments.
- Type
- parameter change
Key changes
- Reduce WBTC liquidation bonus from 9% to 7.5%(medium)
- Reduce REN liquidation bonus from 9% to 7.5%(medium)
- Reduce BAT liquidation bonus from 9% to 7.5%(medium)
- Reduce YFI liquidation bonus from 12.5% to 10%(medium)
- Reduce MKR liquidation bonus from 10% to 8%(medium)
- Reduce ZRX liquidation bonus from 8% to 7.5%(medium)
- Reduce CRV liquidation bonus from 12.5% to 10%(medium)
- Reduce XSUSHI liquidation bonus from 12.5% to 10%(medium)
Notable concerns
- Previous liquidation bonus update resulted in ~$7M in liquidations affecting 21 users
- Risk parameter reductions should be monitored for potential increase in insolvencies during market volatility
Generated by Kvorum
02Description
Simple Summary
A proposal to reduce the liquidation bonus for eleven (11) Aave V2 assets.
Abstract
This proposal is an extension on the previous ARC for liquidation bonus updates and the corresponding AIP-34: Liquidation Bonus Updates that followed. Besides reserve factor changes, no risk parameter values have been updated since the launch of Aave V2. Gauntlet's simulations output initially targeted liquidation bonus values lower than we recommended. Over the past 10 days we have been able to monitor liquidator behavior and have reached higher confidence in further reductions.
Motivation
The updated liquidation bonuses fared very well since AIP execution on 2021-09-04. The liquidation bonus changes impacted about $7M USD worth of liquidations across 21 users. Despite small changes, a bit over $100k USD was saved for those users (mostly in WBTC and SUSHI). Additionally, no additional insolvencies were recorded after the 18% one day drop in ETH price.
Specification
| Current Liquidation_Bonus | Recommended Liquidation Bonus |
|---|---|
| WBTC (9%) | 7.5% |
| REN (9%) | 7.5% |
| BAT (9%) | 7.5% |
| YFI (12.5%) | 10% |
| MKR (10%) | 8% |
| ZRX (8%) | 7.5% |
| CRV (12.5%) | 10% |
| XSUSHI (12.5%) | 10% |
| AAVE (8%) | 7.5% |
| MANA (8%) | 7.5% |
| SNX (9%) | 7.5% |
Implementation
The proposal sets the liquidation bonuses by calling configureReserveAsCollateral on the LendingPoolConfigurator contract at 0x311Bb771e4F8952E6Da169b425E7e92d6Ac45756, using the address and parameters specific to each token.
Copyright
Copyright and related rights waived via CC0.
03Mismatch analysis
I mapped each of the 11 decoded configureReserveAsCollateral calls to their target token address using known Aave V2 mainnet reserve addresses (AAVE, BAT, CRV, MANA, MKR, REN, SNX, xSUSHI, WBTC, YFI, ZRX) and extracted the liquidationBonus parameter (4th argument, expressed as 10000+bonus_bps). Every extracted bonus value matches the 'Recommended Liquidation Bonus' column in the proposal's specification table exactly (e.g., AAVE 10750 -> 7.5%, CRV 11000 -> 10%, MKR 10800 -> 8%, etc.), and all 11 tokens listed in the description correspond one-to-one with the 11 calldata actions, with no extra or missing tokens. The target contract address (LendingPoolConfigurator) matches the one named in the Implementation section. The LTV and liquidationThreshold values are also updated in each call but are not mentioned in the description; however, since the function signature requires these three params together and the description explicitly states these calls will use 'parameters specific to each token' via configureReserveAsCollateral, this is a standard/mechanical detail rather than a hidden or contradictory action, so it does not rise to a reportable discrepancy. Overall, the description accurately and completely represents the on-chain actions with no value, target, or omission issues found.
Generated by Kvorum
04Actions
- Target
- 0x311b…5756
- Value
- 0 wei
- Function
- configureReserveAsCollateral(address,uint256,uint256,uint256)
- Arguments
{ "0": "0x7Fc66500c84A76Ad7e9c93437bFc5Ac33E2DDaE9", "1": "6000", "2": "7000", "3": "10750" }- Calldata
- Target
- 0x311b…5756
- Value
- 0 wei
- Function
- configureReserveAsCollateral(address,uint256,uint256,uint256)
- Arguments
{ "0": "0x0D8775F648430679A709E98d2b0Cb6250d2887EF", "1": "7000", "2": "7500", "3": "10750" }- Calldata
- Target
- 0x311b…5756
- Value
- 0 wei
- Function
- configureReserveAsCollateral(address,uint256,uint256,uint256)
- Arguments
{ "0": "0xD533a949740bb3306d119CC777fa900bA034cd52", "1": "4000", "2": "5500", "3": "11000" }- Calldata
- Target
- 0x311b…5756
- Value
- 0 wei
- Function
- configureReserveAsCollateral(address,uint256,uint256,uint256)
- Arguments
{ "0": "0x0F5D2fB29fb7d3CFeE444a200298f468908cC942", "1": "6000", "2": "6500", "3": "10750" }- Calldata
- Target
- 0x311b…5756
- Value
- 0 wei
- Function
- configureReserveAsCollateral(address,uint256,uint256,uint256)
- Arguments
{ "0": "0x9f8F72aA9304c8B593d555F12eF6589cC3A579A2", "1": "6500", "2": "7000", "3": "10800" }- Calldata
- Target
- 0x311b…5756
- Value
- 0 wei
- Function
- configureReserveAsCollateral(address,uint256,uint256,uint256)
- Arguments
{ "0": "0x408e41876cCCDC0F92210600ef50372656052a38", "1": "5500", "2": "6000", "3": "10750" }- Calldata
- Target
- 0x311b…5756
- Value
- 0 wei
- Function
- configureReserveAsCollateral(address,uint256,uint256,uint256)
- Arguments
{ "0": "0xC011a73ee8576Fb46F5E1c5751cA3B9Fe0af2a6F", "1": "2000", "2": "4500", "3": "10750" }- Calldata
- Target
- 0x311b…5756
- Value
- 0 wei
- Function
- configureReserveAsCollateral(address,uint256,uint256,uint256)
- Arguments
{ "0": "0x8798249c2E607446EfB7Ad49eC89dD1865Ff4272", "1": "3500", "2": "6000", "3": "11000" }- Calldata
- Target
- 0x311b…5756
- Value
- 0 wei
- Function
- configureReserveAsCollateral(address,uint256,uint256,uint256)
- Arguments
{ "0": "0x2260FAC5E5542a773Aa44fBCfeDf7C193bc2C599", "1": "7000", "2": "7500", "3": "10750" }- Calldata
- Target
- 0x311b…5756
- Value
- 0 wei
- Function
- configureReserveAsCollateral(address,uint256,uint256,uint256)
- Arguments
{ "0": "0x0bc529c00C6401aEF6D220BE8C6Ea1667F6Ad93e", "1": "4500", "2": "6000", "3": "11000" }- Calldata
- Target
- 0x311b…5756
- Value
- 0 wei
- Function
- configureReserveAsCollateral(address,uint256,uint256,uint256)
- Arguments
{ "0": "0xE41d2489571d322189246DaFA5ebDe1F4699F498", "1": "6000", "2": "7000", "3": "10750" }- Calldata
05Tally
Summed from votes
06Voters
| Voter | Choice | % of total | Rationale | ||
|---|---|---|---|---|---|
| 320x32b6…4a4d | For | 156.3K | 36.76% | — | 5y ago |
| 100x10f8…1f92 | For | 126.2K | 29.67% | — | 5y ago |
| C10xc17c…64e1 | For | 103.3K | 24.30% | — | 5y ago |
| B80xb8c2…4f87 | For | 18.6K | 4.36% | — | 5y ago |
| 450x458c…730e | For | 10K | 2.35% | — | 5y ago |
| 700x704d…a0df | For | 3.8K | 0.90% | — | 5y ago |
| 680x683a…6c02 | For | 3.1K | 0.73% | — | 5y ago |
| 800x80dc…c146 | For | 2.6K | 0.61% | — | 5y ago |
| F50xf569…271b | For | 1.1K | 0.27% | — | 5y ago |
| 7F0x7f18…caed | For | 75.1 | 0.02% | — | 5y ago |
| 8D0x8d07…a265 | For | 50 | 0.01% | — | 5y ago |
| F10xf191…7914 | For | 49.6 | 0.01% | — | 5y ago |
| A00xa0ef…2d56 | For | 8 | 0.00% | — | 5y ago |
| 320x32ca…c384 | For | 5.9 | 0.00% | — | 5y ago |
07Forum
No forum thread is confidently linked to this proposal.
08Similar proposals
- aaveexecutedLiquidation Bonus Updates93%
- aaveexecutedChaos Labs Risk Parameter Updates - Aave V2 Ethereum80%
- aaveexecutedChaos Labs Risk Parameter Updates78%
- aaveexecutedUpdate AAVE Token LTV/Liquidation Percentages78%
- aaveexecutedAave V2 Ethereum LT Reduction78%
- aaveexecutedV2 Deprecation Plan, 2023.11.2076%
- aaveexecutedEthereum V2 LT Reductions75%
- aaveexecutedV2 Ethereum LT Reductions75%
- aaveexecutedChaos Labs V2 Ethereum and Polygon LT Reductions75%
- aaveexecutedUpdate AAVE V3 ETH Risk Parameters75%