[ARFC] TUSD and BUSD Aave V2 Rate Amendments

[ChaosLabs]

Summary

Amend Interest Rate parameters for TUSD and BUSD Aave V2 deprecated markets.

Motivation

Currently, the highly aggressive interest rate strategy implemented for TUSD and BUSD markets, with the primary objective of deprecating, poses a challenge due to the distribution of bad debt within these markets, as illustrated below:

Due to a significant amount of bad debt in these markets, the anticipated outcome of incentivizing debt repayments may not be realized to the same extent, alternatively resulting in effective virtual debt growth. Although the elevated reserve factor allows the collector to cover a substantial portion of the remaining aToken underlying claims of the respective market as other positions are repaid (provided the collector does not withdraw), this debt growth must be addressed. Otherwise, it could potentially escalate to an arbitrarily high market size, given the magnitude of the current interest rate.

Recommendations

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

Copyright

Copyright and related rights waived via CC0

[MarcZeller]

Hello,

This offboarding has been quite successful at removing potential future problems for Aave while significantly creating revenue for the DAO treasury. (this offboarding generated multiple times the current collector balances)

We suggest the current collector balance of both assets be considered an “exit buffer” for the last aToken holders.

Even in the worst case scenario, the DAO would be largely at a net accounting positive if there’s a need to clear out excess debt.

We support Chaos Labs’ proposal; the current remaining balances are residuals of expected balances.

At some point in the future, we’ll suggest implementing a clean cut of the last few healthy positions with the same process as bgd did on Aave V1 to allow every single aToken holder to leave and migrate to other stablecoins.

[ChaosLabs]

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.

[ChaosLabs]

AIP-66 has been published for this proposal, with voting starting in less than 24h.

Thank you in advance for your participation in the vote.