[ARFC] Chaos Labs - Ethereum V2 LT Reductions - 04/15/2024

Simple Summary

A proposal to reduce Liquidation Thresholds on Aave V2 Ethereum.


In continuation of the deprecation of Aave V2, Chaos Labs advises implementing the subsequent parameter changes to the frozen assets on Aave v2 Ethereum.

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 at each step. We will publicly communicate the planned amendments and list of affected accounts leading to the on-chain execution.

Our recommendations below suggest an LT configuration that optimizes reductions without significantly increasing the number of accounts eligible for liquidation. The proposed values are set at a margin of ~4-6% from the closest LT figure, which would trigger more substantial liquidations.


Aave v2 Ethereum

Asset Current LT Chaos Rec LT Value Liquidated ($) Accounts Liquidated
CRV 14% 0.01% 1.07k 6
LINK 72% 68% 2.82k 7
MKR 14% 10% 280 4
UNI 14% 0.01% 1.12k 12
ZRX 8% 5% - -
Value liquidated Accounts liquidated
Total $5.49k 31

Next Steps

We will move forward with the direct-to-AIP framework and publish an AIP to implement the proposed updates.


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


Copyright and related rights waived via CC0


AIP-81 has been published for this proposal.

Thank you in advance for your participation in the vote.

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As of today, 34 total accounts amounting to ~$5.67K 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 .

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