Freezing UST and Updating stETH Parameters
01Summary
Gauntlet proposes freezing UST on Aave v2 due to oracle unreliability and market conditions, while adjusting stETH risk parameters by increasing liquidation threshold from 75% to 81% and decreasing LTV from 73% to 69% to protect against stETH depeg risk and prevent liquidation cascades.
- Type
- parameter change
Key changes
- Freeze UST reserve on Aave v2(high)
- Increase stETH liquidation threshold from 75% to 81%(high)
- Decrease stETH LTV from 73% to 69%(high)
Notable concerns
- Market uncertainty around stETH peg
- Risk of additional 10% depeg from stETH and ETH price
- Potential for liquidation cascades and protocol insolvency
- Drastic parameter changes could negatively impact user experience if reversed
- LTV decrease prevents new risky positions but existing positions unaffected
Generated by Kvorum
02Description
Simple Summary
Gauntlet proposes freezing UST on Aave v2, increasing liquidation threshold on stETH, and decreasing loan-to-value (LTV) on stETH.
Abstract
Due to market conditions around UST and related oracle unreliability, Gauntlet proposes freezing UST.
Due to current uncertainty around the stETH peg, Gauntlet proposes increasing stETH liquidation threshold to 81% and decreasing stETH LTV to 69%. Currently, stETH liquidation threshold is 75% and stETH LTV is 73%.
Specification
Due to uncertainty around the stETH peg, Gauntlet proposes increasing stETH liquidation threshold. This will allow borrowers using stETH as collateral with more buffer in case stETH continues to depeg, and thus decrease the chances of liquidation cascades that lead to insolvency on the Aave platform. stETH LTV will also be decreased, so new positions will not be able to take on riskier positions using stETH as collateral. Our analysis indicates that an 81% liquidation threshold for stETH should allow for the protocol to withstand an additional 10% depeg from stETH and ETH price. Gauntlet's simulations of the Aave protocol indicated that a decrease in LTV to between 66-69% and an increase in liquidation threshold to 81-82% could significantly decrease liquidation volume as well as total insolvencies while minimally decreasing capital efficiency.
Our simulations also considered larger increases in stETH's liquidation threshold, but these changes had a diminishing impact on liquidation and insolvency decreases in our models. Drastic changes to liquidation threshold can also lead to a negative user experience should protocol parameters be reversed to a more optimal state after the market returns to normal. However, a decrease in LTV only impacts a user's ability to borrow more assets and not deposit or repay debts, and thus won't affect user experience as heavily.
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.
The full list of parameter updates can be found in the forum.
Copyright
Copyright and related rights waived via CC0.
03Mismatch analysis
The proposal claims three actions: freeze UST, raise stETH liquidation threshold to 81%, and lower stETH LTV to 69%. The decoded calldata contains exactly two on-chain calls: (1) freezeReserve on the UST asset address, matching the freeze claim, and (2) configureReserveAsCollateral on the stETH asset address setting LTV to 6900 bps (69%) and liquidation threshold to 8100 bps (81%), which matches the numeric claims in the abstract and specification after basis-point-to-percent conversion. The liquidation bonus parameter (10750, i.e., 107.5%) is included in the call but not mentioned in the prose; this is a routine, unchanged parameter typical for this Aave function signature and not flagged as a discrepancy per the instructions to ignore mechanical/boilerplate details not central to the strategic change. Contract addresses in the description text match the target address in the calldata. No value, target, or omission discrepancies were found that would mislead a delegate about the substance of the proposal.
Generated by Kvorum
04Actions
- Target
- 0x311b…5756
- Value
- 0 wei
- Function
- freezeReserve(address)
- Arguments
{ "asset": "0xa693B19d2931d498c5B318dF961919BB4aee87a5" }- Calldata
- Target
- 0x311b…5756
- Value
- 0 wei
- Function
- configureReserveAsCollateral(address,uint256,uint256,uint256)
- Arguments
{ "0": "0xae7ab96520DE3A18E5e111B5EaAb095312D7fE84", "1": "6900", "2": "8100", "3": "10750" }- Calldata
05Tally
Summed from votes
06Voters
| Voter | Choice | % of total | Rationale | ||
|---|---|---|---|---|---|
| 5B0x5b3b…7c98 | For | 183.4K | 39.70% | — | 5y ago |
| C10xc17c…64e1 | For | 103.3K | 22.37% | — | 5y ago |
| D20xd236…4fa6 | For | 88.5K | 19.17% | — | 5y ago |
| B40xb4f7…d47c | For | 60.4K | 13.08% | — | 5y ago |
| 070x0703…961b | For | 10K | 2.17% | — | 5y ago |
| F30xf36f…d88b | Against | 7.4K | 1.61% | — | 5y ago |
| 7C0x7c99…7a3d | For | 4.3K | 0.92% | — | 5y ago |
| 890x898c…7b34 | For | 4.1K | 0.89% | — | 5y ago |
| 6F0x6fde…206e | For | 327.1 | 0.07% | — | 5y ago |
| DD0xdd65…9abc | For | 50.1 | 0.01% | — | 5y ago |
| 800x800e…4cc9 | For | 22.7 | 0.00% | — | 5y ago |
| F70xf79d…f186 | Against | 12.8 | 0.00% | — | 5y ago |
| E60xe615…5f2b | For | 2.4 | 0.00% | — | 5y ago |
| 870x87c5…869c | For | 2 | 0.00% | — | 5y ago |
| 2C0x2c66…1b6a | For | 1.4 | 0.00% | — | 5y ago |
| 9A0x9a56…91ca | For | 1.3 | 0.00% | — | 5y ago |
| DB0xdb31…eab4 | For | 1.2 | 0.00% | — | 5y ago |
| 6C0x6c4a…acdb | For | 1.1 | 0.00% | — | 5y ago |
| EC0xecd0…6d74 | For | 1.1 | 0.00% | — | 5y ago |
| 8C0x8c69…87bb | For | 1 | 0.00% | — | 5y ago |
| 5D0x5de8…047a | For | 1 | 0.00% | — | 5y ago |
| 830x8330…053a | For | 0.5 | 0.00% | — | 5y ago |
| 420x4254…95b6 | For | 0.3 | 0.00% | — | 5y ago |
| 130x13dd…36a9 | For | 0.3 | 0.00% | — | 5y ago |
| 2C0x2c0b…1673 | For | 0.2 | 0.00% | — | 5y ago |
| 4A0x4a1f…8520 | For | 0.2 | 0.00% | — | 5y ago |
| 4D0x4d47…3ad9 | Against | 0.1 | 0.00% | — | 5y ago |
| 0F0x0f0f…f163 | For | 0.1 | 0.00% | — | 5y ago |
| D10xd173…3730 | For | 0.1 | 0.00% | — | 5y ago |
| 9A0x9a58…2b8b | For | 0.1 | 0.00% | — | 5y ago |
| B10xb1a6…b3da | For | 0.1 | 0.00% | — | 5y ago |
| A10xa197…ca62 | For | 0.1 | 0.00% | — | 5y ago |
| 5F0x5faa…f509 | For | 0.1 | 0.00% | — | 5y ago |
| 6F0x6f96…7d1b | For | 0.1 | 0.00% | — | 5y ago |
| AE0xae79…bc85 | For | 0.1 | 0.00% | — | 5y ago |
| 8D0x8d8f…b95c | For | 0.1 | 0.00% | — | 5y ago |
| FA0xfa14…1d1f | Against | 0.1 | 0.00% | — | 5y ago |
| DA0xda28…554b | For | 0.1 | 0.00% | — | 5y ago |
| A20xa2e7…1870 | For | 0 | 0.00% | — | 5y ago |
| 330x33ce…9105 | For | 0 | 0.00% | — | 5y ago |
| AB0xabca…9567 | For | 0 | 0.00% | — | 5y ago |
| 360x3617…2d0b | For | 0 | 0.00% | — | 5y ago |
| B80xb8fa…e675 | For | 0 | 0.00% | — | 5y ago |
07Forum
No forum thread is confidently linked to this proposal.
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