# \[ARFC\] V2 Ethereum LT Reductions - 01.30.2024
**URL:** https://governance.aave.com/t/arfc-v2-ethereum-lt-reductions-01-30-2024/16468
**Category:** Governance
**Created:** [January 31, 2024, 2:27am UTC](https://governance.aave.com/t/arfc-v2-ethereum-lt-reductions-01-30-2024/16468 "2024-01-31T02:27:24Z")
**Posts on this page:** 7
**Page:** 1
### Author:  [@ChaosLabs](https://governance.aave.com/u/ChaosLabs)
#### Post date: [January 31, 2024, 2:27am UTC](https://governance.aave.com/t/arfc-v2-ethereum-lt-reductions-01-30-2024/16468/1 "2024-01-31T02:27:24Z")
# **Simple Summary**
A proposal to reduce Liquidation Thresholds on Aave V2 Ethereum.
# **Motivation**
Following the [v2 deprecation framework](https://governance.aave.com/t/arfc-aave-v2-markets-deprecation-plan/14870), Chaos Labs and Gauntlet advise implementing the subsequent parameter changes to the frozen assets on Aave v2 Ethereum and Polygon
_As Liquidation Threshold reductions may lead to user accounts being eligible for liquidations upon their approval, we want to clarify the full implications to the community at each step. We will publicly communicate the planned amendments and list of affected accounts leading to the on-chain execution._
# **Specification**
Chaos and Gauntlet align on following recommendations, choosing the higher value between Gauntlet’s aggressive and Chaos’s moderate approach for each asset:
### **Aave v2 Ethereum**
| Asset | Current LT | Recommended LT |
| --- | --- | --- |
| CRV | 18% | 14% |
| ENS | 24% | 0.05% |
| LINK | 74% | 72% |
| MKR | 18% | 14% |
| UNI | 20% | 14% |
| ZRX | 12% | 8% |
| | Value liquidated | Accounts liquidated |
| --- | --- | --- |
| Total | $67,480 | 47 |
# Next Steps
We will move forward with the [direct-to-AIP framework](https://snapshot.org/#/aave.eth/proposal/0x4fd764412e30cb038c7758ef739af089f1a59edfbbda7404751350833e3ad91e) and publish an AIP to implement the proposed updates.
# **Disclaimer**
Chaos Labs and Gauntlet have not been compensated by any third party for publishing this ARFC.
_By approving this proposal, you agree that any services provided by Gauntlet shall be governed by the terms of service available at gauntlet.network/tos._
# Copyright
Copyright and related rights waived via [CC0](https://creativecommons.org/publicdomain)
* * *
# Appendix
## **Gauntlet Analysis**
Following the [deprecation schedule](https://governance.aave.com/t/arfc-aave-v2-markets-deprecation-plan/14870), we recommend the following conservative and aggressive parameter changes to frozen assets on Aave v2 Ethereum. The conservative recommendations aim to limit the maximum amount liquidated per asset to $10,000, and the aggressive recommendations aim to limit the maximum amount liquidated per asset to $25,000.
Out of 25 frozen assets, there are already 19 assets (1INCH, AMPL, BAL, BAT, BUSD, CVX, DPI, ENJ, FEI, FIL, KNC, MANA, RAI, REN, SNX, SUSHI, UST, YFI, ENS]) with LT \<= 0.01.
### **Conservative:**
Under these recommendations, each asset will see less than $10,000 of its collateral liquidated. In total, this will affect 35 accounts, leading to a cumulative liquidation of $14,349.64 in collateral value.
| Asset | Current LT | Rec LT | Value Liquidated ($) | Accounts Liquidated | Cur HF | New HF | Needed HF |
| --- | --- | --- | --- | --- | --- | --- | --- |
| CRV | 0.18 | 0.15 | 10.65 | 1 | 13.3983 | 13.3933 | 1.08 |
| ENS | 0.24 | 0.01 | 6851.32 | 19 | 1.46909 | 1.41373 | 1.07 |
| MKR | 0.18 | 0.15 | 1930.84 | 3 | 1.62945 | 1.60637 | 1.07 |
| UNI | 0.2 | 0.16 | 5444.94 | 10 | 2.01938 | 2.01432 | 1.07 |
| ZRX | 0.12 | 0.07 | 111.89 | 2 | 1.96471 | 1.66306 | 1.28 |
### **Aggressive:**
Under these recommendations, each asset will see less than $25,000 of its collateral liquidated. In total, this will affect 50 accounts, leading to a cumulative liquidation of $84,074.33 in collateral value.
| Asset | Current LT | Rec LT | Value Liquidated ($) | Accounts Liquidated | Cur HF | New HF | Needed HF |
| --- | --- | --- | --- | --- | --- | --- | --- |
| CRV | 0.18 | 0.12 | 23331.8 | 3 | 13.3983 | 13.3884 | 1.08 |
| ENS | 0.24 | 0.01 | 6851.32 | 19 | 1.46909 | 1.41373 | 1.07 |
| LINK | 0.74 | 0.72 | 15237.5 | 6 | 2.00195 | 1.97962 | 1.07 |
| MKR | 0.18 | 0.12 | 21999.8 | 7 | 1.62945 | 1.5833 | 1.07 |
| UNI | 0.2 | 0.14 | 16542 | 13 | 2.01938 | 2.01179 | 1.07 |
| ZRX | 0.12 | 0.07 | 111.89 | 2 | 1.96471 | 1.66306 | 1.28 |
## **Chaos Labs Analysis**
### Moderate (recommended)
The moderate recommendations below suggest an LT configuration that optimizes reductions without significantly increasing the number of accounts eligible for liquidation. The proposed values are set at a margin of ~2-4% from the closest LT figure, which would trigger more substantial liquidations.
| Asset | Current LT | Chaos Rec LT | Value Liquidated ($) | Accounts Liquidated |
| --- | --- | --- | --- | --- |
| CRV | 18% | 14% | 23.44K | 3 |
| ENS | 24% | 0.05% | 6.88K | 19 |
| LINK | 74% | 68% | 28.37K | 17 |
| MKR | 18% | 14% | 12.36K | 14 |
| UNI | 20% | 0.05% | 31.01K | 27 |
| ZRX | 12% | 8% | 102 | 1 |
| | Value liquidated | Accounts liquidated |
| --- | --- | --- |
| Total | $112K | 75 |
### **Aggressive**
The aggressive recommendations below suggest an LT configuration that limits the current value liquidated per asset at $150K. These recommendations also ensure the deprecation of MKR.
| Asset | Current LT | Chaos Rec LT | Value Liquidated ($) | Accounts Liquidated |
| --- | --- | --- | --- | --- |
| CRV | 18% | 10% | 151K | 4 |
| ENS | 24% | 0.05% | 6.88K | 19 |
| LINK | 74% | 64% | 47.15K | 24 |
| MKR | 18% | 0.05% | 107.64K | 14 |
| UNI | 20% | 0.05% | 31.01K | 27 |
| ZRX | 12% | 8% | 102 | 1 |
| | Value liquidated | Accounts liquidated |
| --- | --- | --- |
| Total | $349K | 92 |
---
### Author:  [@ChaosLabs](https://governance.aave.com/u/ChaosLabs)
#### Post date: [February 5, 2024, 5:41pm UTC](https://governance.aave.com/t/arfc-v2-ethereum-lt-reductions-01-30-2024/16468/2 "2024-02-05T17:41:19Z")
[AIP-23](https://app.aave.com/governance/v3/proposal/?proposalId=23) has been published for this proposal, with voting starting in less than 24h.
Thank you in advance for your participation in the vote.
> **[Aave - Open Source Liquidity Protocol](https://app.aave.com/governance/v3/proposal/?proposalId=23)**
>
> Aave is an Open Source Protocol to create Non-Custodial Liquidity Markets to earn interest on supplying and borrowing assets with a variable or stable interest rate. The protocol is designed for easy integration into your products and services.
---
### Author:  [@ChaosLabs](https://governance.aave.com/u/ChaosLabs)
#### Post date: [February 5, 2024, 5:44pm UTC](https://governance.aave.com/t/arfc-v2-ethereum-lt-reductions-01-30-2024/16468/3 "2024-02-05T17:44:20Z")
As of today, 50 total accounts amounting to ~$78.4K are at risk of liquidation following the proposed changes.
The full list of accounts and their projected health score, given the updated LTs can be found in this [sheet](https://docs.google.com/spreadsheets/d/16TUfdgUvkntaiwwX9ahk1CKwYzhxdfVFPvEMFCSLHqQ/edit?usp=sharing).
---
### Author:  [@ChaosLabs](https://governance.aave.com/u/ChaosLabs)
#### Post date: [February 6, 2024, 10:58pm UTC](https://governance.aave.com/t/arfc-v2-ethereum-lt-reductions-01-30-2024/16468/4 "2024-02-06T22:58:37Z")
As of today, 48 total accounts amounting to ~$74.5K are at risk of liquidation following the proposed changes.
The full list of accounts and their projected health score, given the updated LTs can be found in this [sheet](https://docs.google.com/spreadsheets/d/16TUfdgUvkntaiwwX9ahk1CKwYzhxdfVFPvEMFCSLHqQ/edit?usp=sharing).
---
### Author:  [@ChaosLabs](https://governance.aave.com/u/ChaosLabs)
#### Post date: [February 7, 2024, 9:20pm UTC](https://governance.aave.com/t/arfc-v2-ethereum-lt-reductions-01-30-2024/16468/5 "2024-02-07T21:20:43Z")
As of today, 47 total accounts amounting to ~$75K are at risk of liquidation following the proposed changes.
The full list of accounts and their projected health score, given the updated LTs can be found in this [sheet](https://docs.google.com/spreadsheets/d/16TUfdgUvkntaiwwX9ahk1CKwYzhxdfVFPvEMFCSLHqQ/edit?usp=sharing).
---
### Author:  [@ChaosLabs](https://governance.aave.com/u/ChaosLabs)
#### Post date: [February 8, 2024, 9:58pm UTC](https://governance.aave.com/t/arfc-v2-ethereum-lt-reductions-01-30-2024/16468/6 "2024-02-08T21:58:10Z")
As of today, 49 total accounts amounting to ~$74.3K are at risk of liquidation following the proposed changes.
The full list of accounts and their projected health score, given the updated LTs can be found in this [sheet](https://docs.google.com/spreadsheets/d/16TUfdgUvkntaiwwX9ahk1CKwYzhxdfVFPvEMFCSLHqQ/edit?usp=sharing).
---
### Author:  [@system](https://governance.aave.com/u/system)
#### Post date: [March 9, 2024, 9:58pm UTC](https://governance.aave.com/t/arfc-v2-ethereum-lt-reductions-01-30-2024/16468/7 "2024-03-09T21:58:11Z")
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