KVORUM
aaveSource: Aave governor v2 · #45

Risk Parameter Updates 2021-11-04

expiredNov 12, 2021, 12:29 AM UTCby680x683a…6c02

01Summary

AISummary by Kvorumclaude-haiku-4-5

Batch update of risk parameters for five Aave V2 assets (ENJ, REN, SNX, SUSHI, ZRX) adjusting LTV, Liquidation Threshold, and Liquidation Bonus based on recent market volatility and trading volume changes. Additionally, freeze the KNCL (KNC Legacy) reserve to accelerate migration to the new KNC token and reduce risk from a deprecated, less-liquid asset.

Type
parameter change

Key changes

  • ENJ Liquidation Bonus reduced from 10.0% to 7.5%(medium)
  • REN LTV increased from 55% to 60% and Liquidation Threshold increased from 60% to 65%(medium)
  • SNX LTV increased from 30% to 40% and Liquidation Threshold increased from 55% to 60%(medium)
  • SUSHI Liquidation Bonus reduced from 10.0% to 8.5%(medium)
  • ZRX LTV increased from 60% to 65%(medium)
  • KNCL reserve frozen to accelerate KNC token migration and eliminate risk from deprecated, less-liquid asset(high)

Notable concerns

  • KNCL has significantly reduced liquidity as major exchanges have stopped supporting deposit and trading of the deprecated token
  • Current KNCL supply of 916K with 229K borrowed on Aave presents ongoing risk
  • Parameter adjustments are in response to significant market volatility swings and stablecoin reserve withdrawals observed during the recommendation period
Contracts0x311bb771e4f8952e6da169b425e7e92d6ac457560xF629cBd94d3791C9250152BD8dfBDF380E2a3B9c0x408e41876cCCDC0F92210600ef50372656052a380xC011a73ee8576Fb46F5E1c5751cA3B9Fe0af2a6F0x8798249c2E607446EfB7Ad49eC89dD1865Ff42720xE41d2489571d322189246DaFA5ebDe1F4699F4980xdd974D5C2e2928deA5F71b9825b8b646686BD200
Generated by Kvorum
model: claude-haiku-4-5
provider: anthropic
profile: anthropic-fast-v1
prompt: v1.0
generated: 2mo ago
Read the description ↗

02Description

536 words

Simple Summary

A proposal to adjust seven (7) total risk parameters across five (5) Aave V2 assets including LTV, Liquidation Threshold, and Liquidation Bonus. In addition, we propose freezing the KNCL reserve.

Abstract

This proposal is a batch update of risk parameters to align with the the Moderate risk level chosen by the Aave community. These parameter updates are a continuation of Gauntlet's regular parameter recommendations, the latest being AIP-43: Risk Parameter Updates 2021-10-21.

Motivation

This set of parameter updates seeks to maintain the overall risk tolerance of the protocol while making risk trade-offs between specific assets. For more detail on Gauntlet's first two months of recommendations and their impact, please see Q2 Dynamic Risk Parameters and the Monthly Risk Report.

Specification

This past week had significant updates in market conditions as well as drastic changes within the Aave protocol. Volatility drops and increases in trading volume and liquidity for most assets were observed. At the same time, there were significant withdrawals from stablecoins reserves. These transactions should not lead to less protocol safety, but these transient changes are important to consider within the context of ecosystem structure.

ParameterCurrent ValueRecommended Value
ENJ Liquidation Bonus10.0%7.5%
REN Loan To Value55%60%
REN Liquidation Threshold60%65%
SNX Loan To Value30%40%
SNX Liquidation Threshold55%60%
SUSHI Liquidation Bonus10.0%8.5%
ZRX Loan To Value60%65%

See below volatility and exchange volume data from 10/21 to 11/04 that were important drivers for the updated parameter recommendations.

Symbol11-04 Volatility10-21 VolatilityVolatility ChangeWeekly Average Daily Volume Change (%)
ENJ1.134201061.0991623750.0350386854.707755052
REN1.1012341651.530519396-0.4292852310.073368269
SNX0.771065321.070499773-0.2994344531.189819991
SUSHI0.9736810391.284012632-0.3103315930.641782118
ZRX0.84804481.067526026-0.2194812266.053287908

Freezing KNCL The KyberDAO approved the proposal to migrate KNC token contract to a new implementation on 4/20, which enables Kyber governance to upgrade KNC efficiently. As of 11/2, 177M of KNC have migrated to the new Kyber Network Crystal (KNC) and 74M of KNC are still in the old KNC Legacy (KNCL) contract. There is currently 916K KNCL supply and 229k total borrowed on Aave.

Considering that exchanges (e.g. Kraken, Crypto.com) have stopped supporting KNCL deposit and trading, the liquidity of KNCL has also been reduced. We propose freezing KNCL to speed up the KNC migration as well as eliminating the risk of keeping a less liquid deprecated asset on the platform.

Risk Dashboard

The community should use Gauntlet's Risk Dashboard to better understand the updated parameter suggestions and general market risk in Aave V2.

Implementation

The proposal sets the LTV and liquidation threshold ratios by calling configureReserveAsCollateral on the LendingPoolConfigurator contract at 0x311Bb771e4F8952E6Da169b425E7e92d6Ac45756, using the address and parameters specific to each token. KNCL is frozen by using the freezeReserve method of the same LendingPoolConfigurator contract.

The full list of parameter updates can be found in the forum.

Copyright

Copyright and related rights waived via CC0.

03Mismatch analysis

AIMismatch analysis by Kvorumclaude-sonnet-5
Consistent

I mapped each token address in the calldata to the corresponding Aave V2 asset (ENJ, REN, SNX, SUSHI, ZRX, KNCL) using known mainnet token addresses and cross-referenced the notion/legacy KNC address cited in the description. For each configureReserveAsCollateral call, the three parameters (LTV, Liquidation Threshold, Liquidation Bonus factor) were converted from basis points (e.g., 6000 = 60%, 10750 = 107.5% bonus factor = 7.5% bonus) and compared against the recommended values table in the proposal. Every parameter change (REN LTV/LT, SNX LTV/LT, ENJ bonus, SUSHI bonus, ZRX LTV) matches exactly, and unchanged parameters (e.g., ENJ LTV/LT, SUSHI LTV/LT, ZRX LT, bonus values for REN/SNX/ZRX) are passed through unchanged as required by the function signature, which is standard practice and not a discrepancy. The freezeReserve call targets the correct KNCL legacy token address as described. No values, targets, or actions are missing, extra, or misrepresented. The description is a faithful and complete summary of the calldata's effects.

Generated by Kvorum
model: claude-sonnet-5
provider: anthropic
profile: anthropic-strong-v1
prompt: v1.0
generated: 2mo ago
Review the decoded actions ↗

04Actions

6 total
#0freezeReserve(address)chain 0x1
Target
0x311b…5756
Value
0 wei
Function
freezeReserve(address)
Arguments
{
  "asset": "0xdd974D5C2e2928deA5F71b9825b8b646686BD200"
}
Calldata
#1configureReserveAsCollateral(address,uint256,uint256,uint256)chain 0x1
Target
0x311b…5756
Value
0 wei
Function
configureReserveAsCollateral(address,uint256,uint256,uint256)
Arguments
{
  "0": "0xF629cBd94d3791C9250152BD8dfBDF380E2a3B9c",
  "1": "6000",
  "2": "7000",
  "3": "10750"
}
Calldata
#2configureReserveAsCollateral(address,uint256,uint256,uint256)chain 0x1
Target
0x311b…5756
Value
0 wei
Function
configureReserveAsCollateral(address,uint256,uint256,uint256)
Arguments
{
  "0": "0x408e41876cCCDC0F92210600ef50372656052a38",
  "1": "6000",
  "2": "6500",
  "3": "10750"
}
Calldata
#3configureReserveAsCollateral(address,uint256,uint256,uint256)chain 0x1
Target
0x311b…5756
Value
0 wei
Function
configureReserveAsCollateral(address,uint256,uint256,uint256)
Arguments
{
  "0": "0xC011a73ee8576Fb46F5E1c5751cA3B9Fe0af2a6F",
  "1": "4000",
  "2": "6000",
  "3": "10750"
}
Calldata
#4configureReserveAsCollateral(address,uint256,uint256,uint256)chain 0x1
Target
0x311b…5756
Value
0 wei
Function
configureReserveAsCollateral(address,uint256,uint256,uint256)
Arguments
{
  "0": "0x8798249c2E607446EfB7Ad49eC89dD1865Ff4272",
  "1": "4500",
  "2": "6000",
  "3": "10850"
}
Calldata
#5configureReserveAsCollateral(address,uint256,uint256,uint256)chain 0x1
Target
0x311b…5756
Value
0 wei
Function
configureReserveAsCollateral(address,uint256,uint256,uint256)
Arguments
{
  "0": "0xE41d2489571d322189246DaFA5ebDe1F4699F498",
  "1": "6500",
  "2": "7500",
  "3": "10750"
}
Calldata

05Tally

Summed from votes

Voters10
VP participating330.8K
Outcome (current)For
Current support100%

06Voters

10 total
Filter:
VoterChoice% of totalRationale
F60xf63e…78c8For109.7K33.16%—5y ago
C10xc17c…64e1For103.3K31.24%—5y ago
5B0x5bc9…d76cFor63.9K19.31%—5y ago
1B0x1b13…65ceFor34.5K10.43%—5y ago
450x458c…730eFor10K3.02%—5y ago
800x80dc…c146For3.2K0.95%—5y ago
680x683a…6c02For3.1K0.93%—5y ago
700x704d…a0dfFor3.1K0.93%—5y ago
620x62a4…816aFor30.70.01%—5y ago
270x2799…6042For15.60.00%—5y ago
Showing 10

07Forum

No forum thread is confidently linked to this proposal.