Simple Summary
A proposal to adjust thirteen (13) total risk parameters across nine (9) Aave V2 assets including LTV, Liquidation Threshold, and Liquidation Bonus.
Abstract
This proposal is a batch update of three risk parameters based on previously selected community risk level preferences. First, a continuation of the two previous liquidation bonus updates, AIP-34: Liquidation Bonus Updates and AIP-38: Liquidation Bonus Updates for Eleven Aave V2 Assets. Second, updated LTV and Liquidation Threshold parameters to realign with the Moderate risk level chosen by the community.
Motivation
This set of parameter updates seeks to maintain the overall risk tolerance of the protocol while making risk trade-offs between specific assets. While increased volatility affected most assets in the ecosystem, some tail assets experienced even higher volatility and larger collateral usage (supply that is significantly borrowed against). In addition, increased liquidity and decreased trading slippage for certain assets allow for lower liquidation bonuses.
Specification
| Parameter | Current Value | Recommended Value |
|---|---|---|
| WETH Loan To Value | 80% | 82.5% |
| CRV Loan To Value | 40% | 35% |
| ENJ Loan To Value | 50% | 55% |
| ENJ Liquidation Threshold | 60% | 65% |
| MANA Loan To Value | 60% | 65% |
| MANA Liquidation Threshold | 65% | 70% |
| UNI Loan To Value | 60% | 50% |
| YFI Loan To Value | 45% | 50% |
| YFI Liquidation Threshold | 60% | 65% |
| YFI Liquidation Bonus | 10% | 8% |
| ZRX Loan To Value | 60% | 65% |
| XSUSHI Loan To Value | 35% | 30% |
| USDC Liquidation Bonus | 5% | 4% |
See below volatility and collateral usage changes from 9/14 to 9/28 that were important drivers for the updated parameter recommendations.
| Symbol | 09-28 Volatility | 09-14 Volatility | Volatility Change | Collateral Usage Change USD |
|---|---|---|---|---|
| WETH | 1.012094901 | 0.979191725 | 0.032903176 | -86338828 |
| ZRX | 1.474725052 | 1.355540968 | 0.119184084 | -328484 |
| UNI | 1.592116599 | 1.324486507 | 0.267630092 | 4821417 |
| ENJ | 1.660170507 | 1.706717325 | -0.046546818 | -2369990 |
| YFI | 1.248934665 | 1.122133261 | 0.126801404 | -1931790 |
| CRV | 2.050875845 | 1.601331664 | 0.449544181 | -2047792 |
| MANA | 1.514235863 | 1.510912129 | 0.003323734 | -1420138 |
| SUSHI | 1.829557712 | 1.499754067 | 0.329803645 | 4744051 |
Risk Dashboard
The community should use Gauntlet’s Risk Dashboard to better understand the updated parameter suggestions and general market risk in Aave V2.
Next Steps
- Initiate a Snapshot immediately since the community has already weighed in on changes of this nature recently.
- Targeting an AIP on 2021-10-04