SVR Deployment Parameters
We thank all service providers for their joint efforts in preparation for the activation of the SVR pilot feeds. We have prepared the proposed parameter changes that would be enacted as the SVR is rolled out for selected assets. Together with @ChaosLabs and Chainlink, we will monitor the functioning of the SVR mechanism to ensure that the risk factors mentioned above remain minimal. Further adjustments could be discussed and implemented as the performance of the SVR feeds is observed in real-time. We will keep Aave’s community updated regularly.
Methodology
Building on our analysis and considerations discussed in the above comments, the sole change required as of the SVR roll-out is to increase the Liquidation Bonus (LB) parameter which would affect solely the pilot assets: LBTC, tBTC, AAVE, and LINK. These adjustments would align with the observed historical asset volatility and the deviation of prices within a 5-block delay - the SVR feed fallback window configured at initial deployment.
While our goal as risk providers is to ensure the safe functioning of Aave’s markets, we know that the increases in LB could negatively affect the borrower experience, albeit the impact is expected to be minor. As time progresses, we will discuss ways to partially shift the impact away from the users, with possible solutions being the reduction of the Liquidation Protocol Fee parameter or the decrease of the Deviation Threshold in Chainlink’s SVR price feeds.
Price Deviations
We initially analyzed the historical asset price deviations for the observation period starting January 1st, 2022, and ending January 1st, 2025. To more accurately represent the current market conditions, the price deviations of Chainlink market price feeds vs. the VWAP benchmark were now inspected for the period of the last 5 months, October 18th, 2024, to March 18th, 2025. Similar asset price deviations were found, confirming that the most aggressive price deviations within a 5-block follow the same statistical distribution during periods of larger market volatility.
| Asset | Deviation, Mean | Deviation, Median | Deviation, 99th Percentile |
|---|---|---|---|
| AAVE | 0.34% | 0.29% | 1.05% |
| BTC | 0.16% | 0.13% | 0.51% |
| ETH | 0.18% | 0.15% | 0.55% |
| LINK | 0.34% | 0.29% | 1.03% |
Recommended Changes
Based on the observed deviations, we recommend increasing the liquidation bonus by 0.5% for tBTC and LBTC on the Aave’s Core market. Similarly, the LB for AAVE and LINK should be increased by 1%. It is notable that the LB adjustments to LBTC correlated E-Modes would have no effect due to BTC/USD market price feeds being used on both loan sides, therefore these changes were not considered.
Source: Aave Dashboard, March 21st, 2025
| Asset | Parameter | Current Value | New Value |
|---|---|---|---|
| LINK | Liquidation Bonus | 7% | 8% |
| AAVE | Liquidation Bonus | 7.5% | 8.5% |
| tBTC | Liquidation Bonus | 7.5% | 8% |
| LBTC | Liquidation Bonus | 8.5% | 9% |
These changes should be included as part of the AIP payload pushed by BGD Labs and are subject to final governance approval during that stage.
Disclaimer
This review was independently prepared by LlamaRisk, a community-led decentralized organization funded in part by the Aave DAO. LlamaRisk is not directly affiliated with the protocol(s) reviewed in this assessment and did not receive any compensation from the protocol(s) or their affiliated entities for this work.
The information provided should not be construed as legal, financial, tax, or professional advice.