ARC: Risk Parameter Updates for Aave V2 and Aave Arc (Fireblocks) 2022-05-26

Tl;dr: Gauntlet will postpone these parameter changes to give the few (5) users additional time and notice to unwind positions that may be partially liquidated.

Given the current levels of risk in V2, our optimization engine recommends lowering liquidation threshold for LINK and WETH as described above. As such, this set of parameter changes may partially force-liquidate a few recursive borrow users on V2. Although it is essential to recalibrate risk on Aave to avoid potential liquidation cascades and insolvency, after gathering community feedback, we have decided to postpone these parameter changes. Our analysis shows that the potential forced liquidations will be very small. Gauntlet values transparency and is drafting a communications framework to better notify users of parameter changes like these moving forward.

We recommend that users abstain or vote No on the AIP below. We will return to the forums shortly to lay out a plan forward for these V2 parameter changes and the Aave Arc parameter changes in this AIP, which are unrelated to V2 changes.

https://app.aave.com/governance/proposal/?proposalId=78

2 Likes