[ARFC] Aave V2 Interest Rate Curve Recommendations from Gauntlet (2023-04-21)

After the execution of proposal 224 on the Aave v2 Polygon side, we have noticed and received reports from integrators about an issue with the new interest rate strategy contracts applied to WETH, WBTC, USDT, and WMATIC, factually not allowing users to perform actions involving those assets.


The root of the problem is that, for legacy reasons, the v2 version used on Aave v2 Polygon (and Avalanche) is slightly different from Aave v2 Ethereum, in regards to the interface used by the LendingPool to call the rate strategy of an asset. The new interest rate strategies applied to those assets respect the interface of Aave v2 Ethereum, but not v2 Polygon, so when the LendingPool queries the strategy for the current rate, this call reverts, and so does the action “wrapping” it (e.g. deposit, borrow, etc).

Even if this doesn’t put at risk anyhow funds of the pool, impedes users to interact with those assets in the pool until the rate strategy implementation is fixed.
As Aave v2 Polygon is completely controlled via governance, the only possible way to fix this is via a cross-chain governance proposal, which we will submit today, as soon as possible.


We would like to clarify some key aspects for the community:

  • Only Aave v2 Polygon is affected. All other instances of Aave v2 (both v2 Ethereum and Avalanche) are working normally. Of course, Aave v3 is completely fine, as it is a totally different protocol.
  • ALL FUNDS ON THE POOL ARE PERFECTLY SAFE, no matter if affected assets or not. In practice, these users are not able to supply more of those assets, borrow, repay, or withdraw.
  • At the moment, we don’t recommend pausing the pool by Aave Guardian (the only mechanism available), because of the following:
    • In order to improve their HF, users can still supply assets like DAI, USDC, and AAVE to their positions, even if not possible with the affected ones. With pause(), this would not be possible.
    • HF/liquidation threshold dynamics still apply, so 1) the maximum amount to borrow in a position is exactly the same as always 2) if the position is below HF 1 when the fix is applied, it will be liquidated, which means the loss of the liquidation bonus.
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