Summary
LlamaRisk proposes updating Aave V3 Core Umbrella emissions to reflect the decline in underlying aToken yields, which has led Umbrella APRs to exceed base supply yields for key assets such as USDC and USDT. The proposed adjustments aim to restore the intended incentive hierarchy by reducing emissions and rebalancing overall yield composition.
Additionally, for GHO, we propose aligning Umbrella incentives with the forthcoming sGHO Aave Savings Rate (ASR) of 4.25% with an additional buffer of +25bps to compensate stakers for slashing risk. This change preserves the intended relationship between Umbrella rewards and the GHO savings framework while also helping address the current oversubscription of the GHO module.
The recommendations based on our analysis may be updated upon the review and input of @TokenLogic and @AaveLabs as growth managers.
Incentives
Umbrella stakers receive incentives in addition to the base Aave V3 Ethereum Core supply APR. At launch, incentives for USDC, USDT, and WETH were calibrated so that the Umbrella APR would remain slightly below the 1-year average underlying Aave yield.
Since then, a market-wide decline in borrowing demand, accompanied by an expansion in onchain stablecoin supply, has reduced the underlying aToken’s APR for USDC and USDT, while Umbrella emissions have remained unchanged. As a result, Umbrella APRs now exceed the base supply yield, as illustrated in the chart below. More recently, the DAO significantly increased the first-loss “deficit offset” values from $100K to $1.3M and $1.6M for the USDC and USDT modules, respectively, limiting the slashing probability for stakers to long-tail events. In this context, reducing maximum emissions is justified and helps restore the intended balance between Umbrella incentives and base supply yields. Emissions can be further adjusted over time in response to changes in evolving asset yield on Aave Core.
For GHO, Umbrella incentives are designed to align closely with the Aave Savings Rate (ASR) for sGHO. Following the approval of the sGHO Launch Configuration ARFC, which sets the ASR at 4.25% (down from 4.86%), we recommend lowering GHO Umbrella incentives to match a 4.50% APR at targetLiquidity , with a +25 basis points buffer to account for Umbrella slashing risk. This preserves consistency with the Umbrella GHO-sGHO dynamic highlighted in our Umbrella Launch Insights. At the same time, the currently elevated incentives have resulted in significant oversubscription of the GHO module, with utilization at approximately 155% of the target. Lowering emissions should help bring utilization closer to the intended level.
Source: LlamaRisk, April 7, 2026
Target Liquidity
Since the Umbrella launch, total borrows for USDC, USDT, and WETH have increased steadily until February 2026, when users began unwinding positions amid macroeconomic uncertainty. At present, borrow levels for USDC and USDT slightly exceed those observed at launch, while WETH borrows, despite declining after February 2026, remain materially higher than their initial levels. However, a large part of WETH borrows remains to be backed by correlated LST and LRT collateral.
The targetLiquidity parameter for each Umbrella module has remained unchanged since the initial launch in June 2025. Based on our Umbrella methodology, current coverage requirements are broadly aligned with existing targets. As borrow activity appears to have plateaued, we do not propose any changes to targetLiquidity at this stage. We will continue to monitor market conditions on Ethereum Core and adjust coverage as needed.
Source: LlamaRisk, April 7, 2026
Recommendations
The recommendations may be revised upon feedback of @TokenLogic and @AaveLabs.
| Asset | Current Target Liquidity | Recommended Target Liquidity | Current Max Emissions/yr | Recommended MaxEmissions/yr | Umbrella APY at TargetLiquidity | APY Change at Target Liquidity |
|---|---|---|---|---|---|---|
| USDC | 58,330,074 waEthUSDC | 58,330,074 waEthUSDC | 2.33M aEthUSDC | 1.70M aEthUSDC | 2.50% | -0.926% |
| USDT | 92,413,776 waEthUSDT | 92,413,776 waEthUSDT | 3.67M aEthUSDT | 2.68M aEthUSDT | 2.50% | -0.925% |
| WETH | 23,893 waEthWETH | 23,893 waEthWETH | 550 aEthWETH | 550 aEthWETH | 2.27% | unchanged |
| GHO | 12,000,000 GHO | 12,000,000 GHO | 1M GHO | 0.54M GHO | 4.50% | -3.833% |
Next Steps
- Incorporate feedback and escalate ARFC to a Snapshot vote.
- If the ARFC Snapshot outcome is YAE, publish an AIP vote for final confirmation and enforcement of the proposal.
Disclaimer
This review was independently prepared by LlamaRisk, a DeFi risk service provider funded in part by the Aave DAO. LlamaRisk did not receive compensation from the protocol(s) or their affiliated entities for this work. The information should not be construed as legal, financial, tax, or professional advice.