[ARFC] Deprecate Aave V2 AMM Market

Risk
1

Simple Summary

For clarity, we are starting a separate forum thread to follow up on the conversation here two weeks ago.

Given the low usage of the V2 AMM market and its risk/reward profile, this is a temperature check for deprecating the Aave V2 AMM market. Forum discussion can be found here.

Specifically, to

  1. Set Liquidation Threshold to 0 for all LP Tokens
  2. Freeze all other assets (DAI, USDC, Tether, WBTC, ETH)

Motivation

Given the low level of usage on the AMM V2 market, and the fact that the only unfrozen assets are now majors (DAI, USDC, USDT, WBTC, ETH) that are available on V2 ETH and V3 ETH, we recommend deprecating the AMM V2 market. This includes setting LTs to zero for all LP tokens, and freezing all other assets (DAI, USDC, Tether, WBTC, ETH).

Freezing assets does not liquidate positions. Setting LTs to zero can liquidate affected accounts (users who borrow against LP token collateral). There are currently ~$150k deposits of LP tokens in the market.

Next Steps

  • If the Snapshot vote passes, publish AIP with ample notice time for users to adjust their positions as needed.
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Snapshot vote has been published below - voting begins on 4/24/2023. We thank the community for their participation.

https://snapshot.org/#/aave.eth/proposal/0xc0be2141c5623d9233228b715def014050b5e224a6f8ec2c5ea67a15ba5cd8cb

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The Snapshot vote has passed. We plan on putting up an on-chain vote in 4 weeks on 5/29/2023.

Reducing LT to 0 for all LP tokens will make those accounts liquidatable. As such, given the ~1 week long governance process, this would give users 5 weeks from now to make any changes to their positions. Currently, there are ~$120k of LP tokens supplied in the market.

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To give users additional time, we target 6/6/2023 for an on-chain proposal.

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From a technical perspective, we have discovered that there are some limitations with reducing LT to zero for this market. As a result, for now, we will only move forward with freezing the remaining assets (which have been approved by the Snapshot vote), and not reduce LT to zero. As such, our upcoming AIP will not cause any user liquidations.

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AIP published:

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Hi there. I currently have quite a bit of WBTC lent out and stables borrowed on Ethereum V2 AMM. now I have collateral frozen. Can you advise the easiest way to transfer to V3?

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Hey @Jsimo01 ,
Although all reserves are frozen, you can still unwind your position on Ethereum V2 AMM. Just payback your debt and withdraw your collateral

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@Jsimo01 the BGD Aave v2 → v3 migration tool has been enabled between Ethereum v2 AMM and Aave v3 Ethereum on app.aave.com, so you should be able to use it to migrate your position too.

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Thank you - Yes, I moved everything to ETH V3. I should be good…cheers

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