ARC: Update $YFI LTV

For $YFI, we noticed solid support during drawdowns at around $37,000. At the same time, the Yearn Ecosystem is much stronger now, and this says it all:

I propose:

Maximum LTV: 60%
Liquidation threshold: 65%
Liquidation penalty: 5% (because Yearn Finance are our friends)

More info:

  • Yes
  • No

0 voters

Enthusiastic comments about this?

Hi @Laur

Could you detail the rationale behind this parameter suggestion. Model risk parameters are calibrated based on market metrics: volatility, market liquidity, and market cap

YFI is already among the riskiest asset on Aave causing systemic risk due to its high volatility, its market liquidity, and user behavior on Aave who tend to borrow with a lower Health Factor making them more subject to liquidation

Gauntlet Networks came to the same conclusion in:


There’s no systemic risk if the liquidation algo works on AAVE, and the bear market showed us that it works.

As an extra (weak) argument, I’ll show the LTV that $YFI gets in other protocols:

Got the data with Yearn

Here are the collateral parameters for $YFI on Unit Protocol:

“Initial collateral ratio” = LTV

The liquidations are pursued by liquidators not an algorithm… they are affected by many factors besides the smart contract code such as network congestion and market liquidity which impacts price slippage in case of large liquidation volume

Aave has its own risk appetite that prioritises security unlike some of the protocols you have shared which have been subject to exploits or hold bad debt. Here, Compound is the protocol that is the most comparable to Aave. YFI LTV is 0% on Compound, does this mean Aave should follow?

There are a lot of variables to take into account, please read the reports to understand the perspective of experts who have spent years analysing and modelling the protocol and ecosystem. This has a lot more value than just looking at what others players are doing