LlamaRisk supports the proposal brought forward kpk and the overall initiative to deprecate assets across various Aave markets, which will soon be presented by @ChaosLabs. We also note both user experience and governance efficiency as priorities, and, following the discussions with other SPs, we propose minor adjustments to the offboarding approach.
To optimize governance efficiency and minimize the number of AIPs required to raise the reserve factor, we recommend executing an immediate RF increase to 80%. This rate of increase is unlikely to significantly impact the market, as rate-sensitive leverage looping positions are not dominant in the USDC reserve. At the same time, since this market is to be phased off completely, we propose a reserve freeze instead of caps modification. This will achieve exactly the same properties as supply & borrow caps reduction to 1, while also hiding the frozen asset from the general market on Aave’s UI and, therefore, avoiding confusion.
Current USDC.e supply and borrow caps are sufficient to accommodate the migration of positions from USDC. The largest loans backed by USDC primarily involve EURe and GNO as borrowed assets, while USDC borrows are predominantly backed by GNO and WETH. Notably, a single loan accounts for the majority of USDC borrows (736k USDC out of a total of 788k USDC borrows).
Disclaimer
This review was independently prepared by LlamaRisk, a DeFi risk service provider funded in part by the Aave DAO. LlamaRisk is not directly affiliated with the protocol(s) reviewed in this assessment and did not receive any compensation from the protocol(s) or their affiliated entities for this work.
The information provided should not be construed as legal, financial, tax, or professional advice.