ARC Proposal: Proposal to Implement AAVE Liquidation Protection and Notification System

As the AAVE platform continues to evolve, a significant concern for our community is the potential risk associated with volatile market conditions, often leading to unforeseen liquidations that can negatively impact AAVE users.

In response to these concerns, this proposal aims to introduce a Liquidation Protection and Notification System (LPNS) on AAVE v3.

1. Liquidation Protection and Notification System (LPNS): The LPNS would be an opt-in system designed to protect AAVE users from unexpected liquidations due to sudden market drops. Users can subscribe to receive real-time alerts when their collateral is approaching the liquidation threshold, providing them with sufficient time to react and prevent liquidations.
2. User Interface Updates: To accommodate the LPNS, necessary updates will be made to the AAVE user interface. Users will have an easy-to-find option to subscribe or unsubscribe from these notifications.
3. User Education: Alongside the LPNS, this proposal also recommends the creation of educational content on risk management. By educating our users about market risks and mitigation strategies, we can foster a safer ecosystem.
4. Risk Management Committee Oversight: The proposed Risk Management Committee would oversee the development and implementation of the LPNS, ensuring that it meets the community’s needs and expectations.
5. Disclaimer: LPNS will have a disclaimer about AAVE not being responsible in case the feature doesn’t notify a specific user.

This LPNS represents an essential step towards improved risk management on AAVE. By giving users the ability to actively monitor their risk and respond effectively, we believe this will enhance user trust and potentially attract more users to our platform.

Hey there, interesting proposal

But isn’t already supporting AAVE?

Great point, I checked the tool and it in fact provides such support.

Do you think the AAVE interface should recommend users utilize such tools for notification purposes?

Minimizing liquidations will also serve the best interest of maintaining AAVE platform health.

I tend to agree it would be a nice frontend update, I actually thought Hal was already mentioned on the health factor page but it doesn’t look like it

Outside of HAL, we also have both notifications and automated position management at DeFi Saver for both Aave v2 and v3, across Ethereum Mainnet, Arbitrum and Optimism.

Notifications can be set up for certain thresholds, so that you receive a message via telegram or email notifying you of your position dropping below the configured level.
And in terms of actual automated management, there are options for position rebalancing (i.e. partial unwinding), as well as full stop loss options, that would fully close out your position (i.e. “self liquidate”) at selected lower or upper bound market prices.

Don’t want to go into too many details, but there’s a bit more info available here (for notifications) and here (for automation options) in our knowledge base.

Also don’t want to make this too shilly, so will stop here, but if anyone would like any more info on these features, feel free to @ me or shoort me a DM.

In terms of adding this kind of additional services for Aave users into the main, official frontend, my understanding is that these would be added only if they’re being developed and maintained by the same people working on the protocol itself, which is kind of fair, I understand there would otherwise need to be a whole process and risk assessment for adding anything developed by external teams.

Either way, I do agree it would be nice to have these additional tools (and there are certainly others besides DFS and HAL) at least highlighted a bit more prominently somewhere, somehow.

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