[ARFC] Chaos Labs - CRV Aave V3 Polygon - LT Reduction - 10.28.2023

Governance
1

Simple Summary

A proposal to reduce the Liquidation Threshold (LT) for CRV on Aave V3 Polygon.

Motivation

As the market liquidity of CRV has seen a substantial decline, this proposal seeks to address this by decreasing the liquidation threshold (LT) for CRV on Polygon V3. The objective is to mitigate the risk exposure associated with CRV and diminish its borrowing power, thereby aligning it more accurately with the existing market conditions and its parameters on other deployments.

As Liquidation Threshold reductions may lead to user accounts being eligible for liquidations upon their approval, we want to clarify the full implications to the community. Chaos Labs will publicly communicate the planned amendments and list of affected accounts leading to the on-chain execution.

Analysis

Chaos Labs recommends a 15% reduction. As of October 25, seven total accounts amounting to ~$141 are at risk of liquidation following the proposed changes.

Asset Current LT Rec LT Value Liquidated ($) Accounts Liquidated
CRV 65% 50% 141 8

List of affected accounts:

Account Total Supply (USD) Total CRV Supplied Total Borrows (USD) Health Health After Change
0x9ce21324617b6b573e75d28580dcd5a88c41b4bb 106 29.16 86.47 1.01 0.99
0xa21fa160a63993d06daf2cb22f66b9a118a25ed4 97 200.43 59.14 1.07 0.83
0xf36375ef8ef450476541f6326631cac44f9f0a49 58 40.18 41.22 1.07 0.99
0xe9784ffc614fe5cc57939cc7b21cdd2cf8f61c86 17 34.88 10.60 1.09 0.86
0x6c62b64c4e1a4702a41c47d5cdafc29fcba0ebad 12 25.77 6.63 1.23 0.95
0xdb79b400a31997ebc6816f002f2b622fe186056a 12 25.57 6.63 1.22 0.94
0x0906f3f07c7211bdce20d8a7cf9bdd7c3306532d 4 6.7 2.65 1.14 0.96
0x304481771f4922b60a759ac363da3a7da6372cc1 4 0.83 3.5 1.02 1.00

Specification

Asset Parameter Current Value Recommendation Change
CRV LT 65% 50% -15%

Next Steps

  1. Following community feedback, submit the ARFC for a snapshot vote for final approval.
  2. If consensus is reached, submit an Aave Improvement Proposal (AIP) to implement the proposed updates.

Disclaimer

Chaos Labs have not been compensated by any third party for publishing this ARFC.

Copyright

Copyright and related rights waived via CC0

2 Likes
2

We have published a Snapshot for the community to vote on, starting in 24h.

We thank you in advance for your participation in the vote.

3

We support this decreased Liquidation Threshold. With the Curve exploits that happened in August, the CRV/ETH pool on Curve has been fully drained, and was a major source on liquidity. To prevent Aave from taking on a lot of bad CRV debt, its better to ensure that borrowers who supply CRV are only able to take out smaller amounts of borrows.

1 Like
4

AIP-369 has been published for this proposal, with voting starting in less than 24h.

Thank you in advance for your participation in the vote.

5

As of today, 11 total accounts amounting to ~$250 are at risk of liquidation following the proposed changes.

The full list of accounts and their projected health score, given the updated LTs can be found in this sheet .

6

As of today, 11 total accounts amounting to ~$379 are at risk of liquidation following the proposed changes.

The full list of accounts and their projected health score, given the updated LTs can be found in this sheet .

1 Like
7

As of today, 11 total accounts amounting to ~$160 are at risk of liquidation following the proposed changes.

The full list of accounts and their projected health score, given the updated LTs can be found in this sheet .

1 Like
8

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