Summary
LlamaRisk supports the proposal to adjust reserve factor and optimal utilization parameters across various assets and markets. These changes are not expected to alter Aave’s overall risk profile. While there may be a slight increase in short-term liquidation risk due to higher borrow rates, this risk remains low. In the medium to long term, we anticipate supply rebalancing as an indirect outcome of these optimizations.
The most significant impact would be on CRV borrow rates, with the new rate on Aave’s Core market rising to 15.6%. This could lead to increased borrow repayments and more pronounced capital migration to different lending venues in the future.
To offset the aggressive impact on CRV borrow rates and align BAL with the broader market rates, we recommend reducing the Slope1 parameters for these assets together with the originally proposed changes. The exact parameter recommendations will be presented jointly with Chaos Labs.
Reserve Factor Changes
Changing the reserve factor will not impact borrow rates, but it will reduce supply rates, as Aave would retain a larger portion of the interest paid by borrowers. Of the four assets affected by this change, only rlUSD has a significant market size, with $132.74 million supplied and a current utilization rate of 30.14%. The other three assets have negligible market sizes.
Source:
Aave Dashboard, May 29th, 2025
The impact on supply rates is expected to be minimal. For rlUSD, the supply rate would decrease by just 7 basis points. The largest reductions would be for crvUSD and USDtb, but these would not exceed 45 basis points. As a result, the overall utility for suppliers would remain largely unchanged. Additionally, the increase in revenue for the Aave DAO from this adjustment is expected to be minimal.
| Asset |
Current Supply Rate (%) |
Estimated Supply Rate at 20% RF (%) |
Change (%) |
| crvUSD |
3.94% |
3.50% |
-0.44% |
| rlUSD |
0.66% |
0.59% |
-0.07% |
| USDtb |
3.18% |
2.83% |
-0.35% |
| USDâ‚® |
0.00% |
0.00% |
0.00% |
Optimal Utilization Changes
All asset reserves proposed for a downward adjustment of the optimal utilization rate have consistently shown lower utilization in their respective Aave markets. Most of these assets have minimal outstanding borrows, with the exception of CRV on Aave Core, which currently has $5 million in borrows.
Source:
Aave Dashboard, May 29th, 2025
Once these changes are implemented, CRV borrow rates on both the Ethereum and Polygon markets are expected to rise significantly, reaching up to 15.6% APY. These higher rates may prompt borrowers to repay their positions and migrate to other platforms over the medium term. However, there are no immediate liquidation risks for either CRV deployment.
| Market |
Asset |
Current Borrow Rate (%) |
New Borrow Rate (%) |
Change (%) |
| Ethereum Core |
CRV |
11.76% |
15.63% |
+3.87% |
| Ethereum Core |
SNX |
6.59% |
9.02% |
+2.43% |
| Ethereum Core |
BAL |
6.26% |
6.90% |
+0.64% |
| Polygon |
CRV |
9.20% |
12.05% |
+2.85% |
| Polygon |
BAL |
7.33% |
8.69% |
+1.36% |
Although CRV borrow rates would increase as a result of this change, it is expected that utilization rates would gradually decrease over time. One potential way to offset the immediate increase of borrow rates would be to adjust the Slope1 parameter to more moderate levels. The same change could also be applied for BAL reserves, making BAL borrow rates aligned with broader market rates.
Recommended Parameters
Will be presented shortly in collaboration with Chaos Labs.
Disclaimer
This review was independently prepared by LlamaRisk, a community-led decentralized organization 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.
