Simple Summary
A proposal to reduce Liquidation Threshold (LT) for CRV on Aave V2 Ethereum.
Motivation
Following the CRV V2 Ethereum Deprecation Plan approved by the community and given the current market conditions and protocol usage, Chaos Labs and Gauntlet aligned on a 2% LT reduction.
Chaos originally proposed a 3% reduction, while Gauntlet proposed a 2% reduction. The individual analyses and considerations can be found below.
As of today, this LT reduction will not make any account eligible for liquidation.
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. Chaos Labs will publicly communicate the planned amendments and list of affected accounts leading to the on-chain execution.
Chaos Labs Analysis
Chaos Labs recommends a 3% reduction, with the following impact on top CRV suppliers (used as collateral):
| Account | Total Supply (USD) | Total CRV Supplied | Total Borrows (USD) | Health | Health After Change |
|---|---|---|---|---|---|
| 0x7a16ff8270133f063aab6c9977183d9e72835428 | 40.86M | 92.88M | 10.36M | 1.85 | 1.78 |
| 0xc420c9d507d0e038bd76383aaadcad576ed0073c | 2M | 4.54M | 440K | 2.13 | 2.00 |
| 0xb5587a54ff7022ac218438720bdcd840a32f0481 | 1.65M | 1.52M | 936K | 1.24 | 1.21 |
| 0x279a7dbfae376427ffac52fcb0883147d42165ff | 735K | 1.35M | 324K | 1.25 | 1.18 |
| 0xaecdde1672f3f121b3a6c43a2e0b5dfc28f6224c | 449K | 1.02M | 176K | 1.20 | 1.12 |
Gauntlet Analysis
Guantlet recommends reducing CRV LT from 47% to 45% this week.
There have been no material changes to the user’s position over the past week. Given CRV price increase to 0.443, this increases HF to 1.88.
Daily CRV volatility is ~ 4.5%, and CRV liquidity has slightly improved since last week. Based on Gauntlet’s deprecation schedule highlighted here, we recommend having sufficient buffer to the user’s historical maintained HF of 1.6. Reducing LT to 45% maintains this buffer.
The change reduces the user’s HF to 1.8. Below are accounts whose HF will be < 1.1 with the change. No accounts will be liquidated.
| user_address | supply_balance_usd | borrow_balance_usd | hf | hf_new | supplied_symbols | borrowed_symbols | orig_lt | new_lt |
|---|---|---|---|---|---|---|---|---|
| 0x7421c1ed16b400e4868ce696452c3c985f8cd04d | 24017.0 | 10220.61 | 1.10 | 1.06 | [CRV] | [USDT] | 0.47 | 0.45 |
| 0xe95d1bf610fdb4e5d573b4d4a7fec04cfa82b863 | 189.0 | 79.40 | 1.12 | 1.07 | [CRV] | [WETH] | 0.47 | 0.45 |
Specification
| Asset | Parameter | Current Value | Recommendation | Change |
|---|---|---|---|---|
| CRV | LT | 47 | 45 | -2% |
Next Steps
As the community approved a direct-to-AIP framework for the CRV deprecation plan, we plan to submit an Aave Improvement Proposal (AIP) to implement the proposed updates.
Disclaimer
Chaos Labs and Gauntlet have not been compensated by any third party for publishing this ARFC.
Copyright
Copyright and related rights waived via CC0