KVORUM
aaveSource: Aave governor v2 · #83

Freeze stETH, Increase stETH Liq. Threshold to 90%, Pause ETH Borrowing

defeatedJun 17, 2022, 11:32 AM UTCby680x683a…6c02

01Summary

AISummary by Kvorumclaude-haiku-4-5

This proposal mitigates stETH/ETH depeg risks in Aave v2 by freezing the stETH market to prevent new positions, increasing stETH's liquidation threshold to 90%, and pausing ETH borrowing to prevent users from increasing risk exposure on existing positions.

Type
parameter change

Key changes

  • Freeze stETH market to prevent new positions from being opened while allowing existing users to wind down positions(high)
  • Increase stETH liquidation threshold (LT) to 90% to provide existing positions more protection against stETH/ETH price deviation(high)
  • Pause ETH borrowing to prevent users from increasing risk exposure through recursive borrowing with the new higher liquidation threshold(high)

Notable concerns

  • Risk of liquidation spirals if stETH depegs from ETH
  • Large spike in Aave VaR observed starting June 10 due to stETH price volatility
  • Freezing market and pausing borrowing may restrict user activity while mitigations are in place
Contracts0x311bb771e4f8952e6da169b425e7e92d6ac457560xae7ab96520DE3A18E5e111B5EaAb095312D7fE840xC02aaA39b223FE8D0A0e5C4F27eAD9083C756Cc2
Generated by Kvorum
model: claude-haiku-4-5
provider: anthropic
profile: anthropic-fast-v1
prompt: v1.0
generated: 2mo ago
Read the description ↗

02Description

378 words

Freeze stETH, Increase stETH Liq. Threshold to 90%, Pause ETH Borrowing

Simple Summary

Mitigate risk to Aave v2 markets relating to the price deviation of stETH/ETH.

Abstract

Forum Discussion

stETH has emerged over recent months as one of the most popular collateral types on AAVE. Many users have deposited stETH and borrowed ETH against it. This means that if those prices diverge or the asset “depegs”, there could be a lot of liquidations in AAVE. There has been much speculation on the risks posed by a stETH/ETH price depeg on the protocol. This proposal follows up on our last post to provide further risk mitigation actions.

Starting June 10, Gauntlet observed a large spike in AAVE VaR due to volatility in stETH price and immediately investigated it further. The following steps mitigate the chance of a liquidation spiral negatively impacting AAVE tokenholders and users.

  1. Freeze the stETH market

This will prevent new positions from being opened. This will temporarily pause the stETH market except for people winding down their positions. This is essential as it allows us to take the next step, increasing the liquidation threshold (LT) for ETH. If we don’t pause the market, users could increase the risk by opening new positions that take advantage of the increased LT.

  1. Increase LT for stETH to 90%

This will give existing positions more breathing room with regards to stETH/ETH price deviation (you can the see effect of this in the heatmaps above) and will make the protocol much more resilient to a further depeg.

  1. Pause ETH borrowing

If LT is changed, then preventing existing positions from increasing their risk exposure is required. To do this, you would need to prevent new ETH borrows from being opened. Almost all ETH borrowing is recursive borrowing and so while there is limited demand for ETH borrow, it’s still something users want.

Implementation

The proposal implements its changes by calling configureReserveAsCollateral, freezeReserve, and disableBorrowingOnReserve on the LendingPoolConfigurator contract at 0x311Bb771e4F8952E6Da169b425E7e92d6Ac45756, using the address and parameters specific to each token and each parameter update.

Copyright

Copyright and related rights waived via CC0.

By approving this proposal, you agree that any services provided by Gauntlet shall be governed by the terms of service available at gauntlet.network/tos.

03Mismatch analysis

AIMismatch analysis by Kvorumclaude-sonnet-5
Minor discrepancy

I mapped each of the three prose actions (freeze stETH, raise stETH liquidation threshold to 90%, pause ETH borrowing) to the three decoded calls. Action 0 (disableBorrowingOnReserve on WETH) matches the ETH-borrow pause claim — target address is canonical WETH, consistent with 'ETH borrowing'. Action 1 (freezeReserve on the stETH address) matches the freeze claim. Action 2 (configureReserveAsCollateral on stETH) sets LT to 9000 = 90%, exactly matching the stated 90% target — no value mismatch there. However, the same call also sets LTV to 6900 (69%) and liquidation bonus to 10750 (107.5%), which the description does not explicitly call out; it only mentions the LT change. This is a legitimate summarization on Aave's part since configureReserveAsCollateral inherently bundles all three parameters together, and the Implementation section does note that 'parameters specific to each token' are being updated, softening the omission. Given the core three actions (freeze, LT increase, borrow pause) align precisely with calldata targets and values, and the omitted LTV/bonus details are a natural side-effect of the single collateral-config call rather than a hidden separate action, I classify this as a minor discrepancy rather than material, with high confidence in the comparison.

Discrepancies

  • lowomitted in description

    The configureReserveAsCollateral call also changes stETH's Loan-to-Value (LTV) to 69% and the liquidation bonus to 107.5%, but the description only discusses the liquidation threshold change to 90% and does not mention these two accompanying parameter changes explicitly (though the Implementation section vaguely references 'parameters specific to each token').

    “Increase LT for stETH to 90%”

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

04Actions

3 total
#0disableBorrowingOnReserve(address)chain 0x1
Target
0x311b…5756
Value
0 wei
Function
disableBorrowingOnReserve(address)
Arguments
{
  "asset": "0xC02aaA39b223FE8D0A0e5C4F27eAD9083C756Cc2"
}
Calldata
#1freezeReserve(address)chain 0x1
Target
0x311b…5756
Value
0 wei
Function
freezeReserve(address)
Arguments
{
  "asset": "0xae7ab96520DE3A18E5e111B5EaAb095312D7fE84"
}
Calldata
#2configureReserveAsCollateral(address,uint256,uint256,uint256)chain 0x1
Target
0x311b…5756
Value
0 wei
Function
configureReserveAsCollateral(address,uint256,uint256,uint256)
Arguments
{
  "0": "0xae7ab96520DE3A18E5e111B5EaAb095312D7fE84",
  "1": "6900",
  "2": "9000",
  "3": "10750"
}
Calldata

05Tally

Summed from votes

Voters0
VP participating0
Outcome (current)—
Current support—

06Voters

0 total

No votes recorded yet.

07Forum

No forum thread is confidently linked to this proposal.