[ARFC] Align AAVE Risk Parameters on Aave V3 Ethereum Market with Aave V2

Governance
1

title: [ARFC] Align AAVE Risk Parameters on Aave V3 Ethereum Market with Aave V2
Author: @Marczeller - Aave-Chan Initiative
Date: 2023-04-05

Summary

This Aave Request for Comments (ARFC) proposes the alignment of the AAVE risk parameters on the Aave V3 Ethereum market with those on Aave V2, as the current parameters on Aave V3 are less attractive for users considering migration. By matching the Aave V2 parameters, we aim to encourage migration and ensure a smoother transition for users. This proposal does not suggest any changes to Aave V3 caps or interest rate strategies.

Proposed Aave V3 Parameter Changes

To make Aave V3 more attractive for migration and to match Aave V2 parameters, we propose the following changes:

  1. Loan-to-Value (LTV): Increase the LTV from 60% to 66%.
  2. Liquidation Threshold (LT): Increase the LT from 70% to 73%.
  3. Liquidation Penalty (LP): Maintain the current LP of 7.5%, as it is already in alignment with Aave V2.

No changes to Aave V3 caps or interest rate strategies are proposed in this ARFC.

Recap Table

Parameter Current Aave V3 Current Aave V2 Proposed Aave V3
Loan-to-Value (LTV) 60% 66% 66%
Liquidation Threshold (LT) 70% 73% 73%
Liquidation Penalty (LP) 7.5% 7.5% 7.5%

Disclaimer

The Aave-Chan Initiative (ACI) is not compensated in any form for creating this ARFC proposal.
This ARFC has been prepared solely to facilitate community discussion.
At the time of writing, the author owns ~26k AAVE or related assets for a value of approx $2M.

Next Steps

  1. Gather feedback and input from the Aave community and risk service providers on the proposed risk parameters and deployment details.
  2. Refine the ARFC based on community feedback and risk service provider recommendations.
  3. If consensus is reached and the proposal is refined, submit the ARFC for a snapshot vote for final approval.
  4. If consensus is reached, submit an Aave Improvement Proposal (AIP) to update the risk parameters on the Aave V3 Ethereum market.

Copyright

Copyright and related rights waived via CC0.

1 Like
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Chaos Labs supports aligning the AAVE risk parameters on the Aave V3 Ethereum market with those on Aave V2. This aligns with our V2→V3 migration strategy, enabling users to continue leveraging the benefits of the Aave protocol while taking advantage of the new and enhanced features offered on V3.

1 Like
3

this proposal has been escalated to Snapshot stage

4

We’re in support of this parameter adjustment as it will accelerate adoption of Aave V3.

5

Gauntlet supports the proposed alignment of AAVE risk parameters between Aave V3 and Aave V2. From a market risk perspective, our models observe that no outsized risk will be added as a result of these parameter changes. As such, we support these parameter changes.

4 Likes
6

sorry，but LTV and LT of what？
every assets` LTV and LT are different right?

7

The discussion is about the parameters for the AAVE token.

2 Likes