[ARC] Risk Parameter Updates for Aave V2 Polygon and Aave V3 AVAX 2022-11-23

Summary

A proposal to make parameter changes on Aave V2 Polygon and Aave V3 AVAX.

Motivation

Aave V2 lacks many of the risk controls that Aave V3 solves for (supply caps, borrow caps, isolation mode, e-mode, etc.). Given that the market situation of these assets is currently volatile, out of an abundance of caution, we recommend freezing the following markets on Aave V2 Polygon and promote migration to V3. These recommendations are in line with the rationale of AIP 121.

  • BAL
  • CRV
  • DPI
  • GHST
  • LINK
  • SUSHI

We also recommend the following borrow caps for the Aave V3 AVAX Market. Borrow caps help prevent against high-risk attack vectors while sacrificing little capital efficiency. Our simulation analyses show that these borrow caps for these assets reduce the likelihood of market manipulation while allowing for natural organic borrow demand. As these markets naturally grow, we can continue to reassess raising caps incrementally.

  • FRAX borrow_cap: 2,000,000
  • MAI borrow_cap: 2,000,000
  • LINK borrow_cap: 220,000

Specification

Freeze BAL, CRV, DPI, GHST, LINK, and SUSHI on Aave V2 Polygon.

Set borrow caps on FRAX, MAI, and LINK on Aave V3 AVAX.

Next Steps

  • Initiate AIP for Aave V2 Polygon markets
  • Initiate Snapshot vote for Aave V3 AVAX recommendations (because the governance process is handled via Snapshot instead of an on-chain vote)

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. This message is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation for any security, nor does it constitute an offer to provide investment advisory or other services by Gauntlet Networks Inc. No reference to any specific security constitutes a recommendation to buy, sell or hold that security or any other security. Nothing in this report shall be considered a solicitation or offer to buy or sell any security, future, option or other financial instrument or to offer or provide any investment advice or service to any person in any jurisdiction. Nothing contained in this report constitutes investment advice or offers any opinion with respect to the suitability of any security, and the views expressed in this report should not be taken as advice to buy, sell or hold any security. The information in this report should not be relied upon for the purpose of investing. In preparing the information contained in this report, we have not taken into account the investment needs, objectives and financial circumstances of any particular investor. This information has no regard to the specific investment objectives, financial situation and particular needs of any specific recipient of this information and investments discussed may not be suitable for all investors. Any views expressed in this report by us were prepared based upon the information available to us at the time such views were written. Changed or additional information could cause such views to change. All information is subject to possible correction. Information may quickly become unreliable for various reasons, including changes in market conditions or economic circumstances.

2 Likes

V3 AVAX Snapshot vote below:

https://snapshot.org/#/aave.eth/proposal/0x3f4a96dcf93b2d9c7cbfa6c1b627f995ed420e57492b333843783434588f4370

V2 Polygon recommendations below: