I support the goal of making affected users whole and restoring confidence in Aave markets.
However, I believe the sequence matters. Before the affected markets fully return to normal operation, Aave should first reduce LTVs and adjust collateral risk parameters for rsETH / wrsETH and other assets with similar structural risks.
The recovery fund can help repair the immediate shortfall, but it does not by itself reduce future risk. If the DAO provides 25,000 ETH to support the recovery while the same collateral parameters remain in place, the protocol may be restoring confidence financially without fixing the risk conditions that contributed to the problem.
In my view, Aave should not simply fund the recovery and then resume normal operation under the old risk assumptions. The safer approach would be:
- Support the recovery and protect affected users.
- Immediately adjust LTVs, liquidation thresholds, supply caps, borrow caps, and collateral eligibility where needed.
- Only then allow affected markets to gradually return to normal operation.
- Establish a clearer collateral risk framework so similar assets are not allowed to operate with excessive borrowing power again.
This is not about delaying user protection. It is about making sure the DAO does not spend a large amount of treasury assets while leaving the protocol exposed to the same category of risk.
Aave needs to restore trust, but trust will not be rebuilt only through funding. It also requires visible risk reduction, better collateral standards, and a clear signal that normal operation should only resume after the protocol’s risk parameters have been corrected.
In addition, I would suggest that Aave consider creating an independent L2BEAT-style public dashboard for collateral risk.
If Aave is going to rely on numerical risk scores to determine LTV caps and collateral eligibility, those scores should be publicly visible, continuously updated, and easy to compare across assets.
The dashboard could show each collateral asset’s score, the reasoning behind that score, and the specific areas where the asset can improve, such as oracle risk, liquidity depth, wrapper depth, redemption mechanisms, bridge dependencies, governance/admin controls, market concentration, and historical incidents.
This would bring several benefits:
- Users and delegates could clearly understand why an asset receives a certain LTV or eligibility status.
- Collateral issuers would have a clear roadmap for improving their score.
- Projects would be incentivized to improve the quality of their collateral in order to qualify for better parameters over time.
- Aave governance would become more transparent, comparable, and less reactive.
However, I believe this should be implemented as an independent public dashboard, not as new functionality added directly into Aave V3.
The dashboard should provide transparent scoring, analysis, and recommended parameter ranges, while actual parameter changes should still be executed manually through Aave governance. For example, governance could use the dashboard as a reference when deciding whether to adjust LTVs, liquidation thresholds, supply caps, borrow caps, or collateral eligibility.
At this stage, I do not think Aave V3 should be modified with additional on-chain functionality for this purpose. The framework should inform governance decisions, not automatically enforce them.
This approach would preserve governance oversight, avoid unnecessary smart contract complexity, and reduce the risk of turning a risk-management framework into another source of protocol risk.
In my view, Aave needs a collateral framework that is transparent, comparable, and continuously updated. An independent collateral risk dashboard could help turn risk management into an ongoing market discipline rather than a one-time governance discussion after each incident.
Rescue first is understandable, but resuming normal operation before reducing risk would be the wrong lesson from this incident.