Simple Summary
A proposal to adjust thirteen (13) total risk parameters across eleven (11) Aave V2 assets including LTV, Liquidation Threshold, and Liquidation Bonus.
Abstract
This proposal is a batch update of three risk parameters to align with 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-39: Risk Parameter Updates for Aave V2 assets.
Motivation
This set of parameter updates seeks to maintain the overall risk tolerance of the protocol while making risk trade-offs between specific assets. Volatility for non-stablecoin crypto assets remains high. As such, we focused on supporting protocol safety for our parameter changes in this cycle.
Adjustments were also made for three liquidation bonus values. These assets (UNI, BAL, LINK) saw increases in liquidity and trading volume and a reduced liquidation recommended value as a result. As always, simulation recommended values seek to maintain capital efficiency and uphold borrow usage levels.
Specification
| Parameter | Current Value | Recommended Value |
|---|---|---|
| REN Loan To Value | 55% | 50% |
| SNX Loan To Value | 20% | 30% |
| SNX Liquidation Threshold | 45.0% | 55.0% |
| DPI Loan To Value | 60% | 55% |
| UNI Loan To Value | 60% | 55% |
| UNI Liquidation Bonus | 10.0% | 8.0% |
| YFI Loan To Value | 45% | 50% |
| BAL Liquidation Bonus | 10.0% | 8.0% |
| LINK Liquidation Bonus | 10.0% | 7.5% |
| BAT Liquidation Threshold | 75.0% | 80.0% |
| ENJ Liquidation Threshold | 60.0% | 65.0% |
| MANA Liquidation Threshold | 65.0% | 75.0% |
| ZRX Liquidation Threshold | 70.0% | 75.0% |
See below volatility and exchange volume data from 9/28 to 10/06 that were important drivers for the updated parameter recommendations.
It is important to note that these drivers give insight into why Gauntlet’s simulations will output a new VaR calculation for a set of parameters, but each parameter can not be estimated by input changes. For example, the decrease in trading volume for DPI indicates lowered liquidity, while there are large increases for ENJ, MANA, and BAT. These suggest more liquidity and easier liquidations, but that relationship changes over time.
| Symbol | 10-06 Volatility | 09-28 Volatility | Volatility Change | Weekly Average Daily Volume Change (%) |
|---|---|---|---|---|
| BAL | 1.571708299 | 1.639825348 | -0.068117049 | -10.9455427 |
| BAT | 1.26231086 | 1.275188876 | -0.012878016 | 15.9070933 |
| DPI | 1.248509981 | 1.229162786 | 0.019347195 | -32.3316308 |
| ENJ | 1.684204979 | 1.660170507 | 0.024034472 | 41.6823744 |
| LINK | 1.516493567 | 1.544861958 | -0.028368391 | -26.3753689 |
| MANA | 1.496152162 | 1.514235863 | -0.018083701 | 17.6977064 |
| REN | 2.073377777 | 2.076540272 | -0.003162495 | -30.6057152 |
| SNX | 1.817169075 | 1.805791921 | 0.011377154 | -8.6204277 |
| UNI | 1.625790476 | 1.592116599 | 0.033673877 | -10.4719062 |
| YFI | 1.240436029 | 1.248934665 | -0.008498636 | -4.4142493 |
| ZRX | 1.496783606 | 1.474725052 | 0.022058554 | -14.7444996 |
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 2021-10-11