[Direct to AIP] Risk Parameter Adjustments for Aave V3 Scroll Instance

Governance
1

[Direct to AIP] Risk Parameter Adjustments for Aave V3 Scroll Instance

Author: ACI

Date: 2025-09-11

Proposal has been updated with latest Risk Parameters by Risk Service Providers 2025-09-12

Summary

This Direct to AIP proposes immediate risk parameter adjustments for all assets on the Aave V3 Scroll instance to mitigate potential risks arising from ongoing governance instability within the Scroll ecosystem. The proposal seeks to increase Reserve Factors (RF) across all assets and implement conservative supply and borrow cap reductions to protect the Aave protocol and its users.

Motivation

Recent governance developments within the Scroll ecosystem have introduced material uncertainty and potential risks that warrant immediate protocol protection measures. As a responsible risk management action, these adjustments aim to:

  • Reduce Exposure: Lower caps will limit the protocol’s total exposure to Scroll-based assets
  • Maintain Protocol Safety: Conservative parameters ensure protocol resilience during governance instability
  • Enable Swift Response: Direct to AIP process allows for rapid implementation of necessary risk controls

Specification

  1. Reserve Factor Updates: Increase RF for all listed assets to 50%.
  2. Supply Cap Updates: Reduce supply caps to current level across all assets
  3. Borrow Cap Updates: Reduce borrow caps to current level for all borrowable assets

Proposal has been updated with latest Risk Parameters by Risk Service Providers 2025-09-12

Asset Chain Current Supply Cap Recommended Supply Cap Current Borrow Cap Recommended Borrow Cap Current Reserve Factor Recommended Reserve Factor
WETH Scroll 15,000 5,000 13,500 4,500 15% 50%
weETH Scroll 15,000 5,000 1 - 45% 50%
wstETH Scroll 2,000 1,000 1,000 500 5% 50%
USDC Scroll 6,000,000 2,000,000 5,400,000 1,900,000 10% 50%
SCR Scroll 1,500,000 - 28,000 - 20% 50%

Implementation

This proposal will be implemented through the Direct to AIP process, enabling rapid deployment of risk mitigation measures. The changes will take effect immediately upon AIP execution.

Next Steps

  1. Direct AIP publication and voting
  2. Implementation upon successful vote
  3. Ongoing monitoring of Scroll governance developments

Disclaimer

This proposal is submitted by ACI (Aave Chan Initiative) as a risk management measure. The proposal is not intended to pass judgment on Scroll governance but rather to implement prudent risk controls during a period of uncertainty.

Copyright

Copyright and related rights waived under CC0.

5 Likes
2

Summary

Given the uncertainty of the situation, Chaos Labs supports the changes proposed to risk parameters in the Aave V3 Scroll instance. Specifically, it supports the increase of Reserve Factor across all of the Scroll markets and the decrease in supply and borrow caps to match the current demand.

Motivation

The Scroll ecosystem is currently undergoing a phase of heightened uncertainty with unclear governance direction. This introduces plausible risks that could directly affect the resilience of deployed protocols such as Aave.

Additionally, on-chain activity on Scroll has contracted significantly over the last year. Supply and borrow on Aave Scroll, which once exceeded $400M and $250M respectively, have fallen to ~$47M supply and ~$23M borrow today, reflecting a steep reduction in demand.

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More critically, DEX liquidity on Scroll has deteriorated even further, with TVL across key DEXs (SyncSwap, Ambient, Honeypop) dropping from over $80M in late 2024 to less than $15M today. This thin liquidity environment increases liquidation risk and limits the potential growth of the Aave instance in the future.

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Together, these dynamics justify conservative adjustments to reduce exposure and temporarily manage growth. Chaos Labs will continue to monitor the situation and update the recommended parameters following an improvement of Scroll’s demand and liquidity.

Specification

Asset Chain Current Supply Cap Recommended Supply Cap Current Borrow Cap Recommended Borrow Cap Current Reserve Factor Recommended Reserve Factor
WETH Scroll 15,000 5,000 13,500 4,500 15% 50%
weETH Scroll 15,000 5,000 1 - 45% 50%
wstETH Scroll 2,000 1,000 1,000 500 5% 50%
USDC Scroll 6,000,000 2,000,000 5,400,000 1,900,000 10% 50%
SCR Scroll 1,500,000 - 28,000 - 20% 50%

Disclaimer

Chaos Labs has not been compensated by any third party for publishing this recommendation.

Copyright

Copyright and related rights waived via CC0

3 Likes
3

LlamaRisk supports this proposal and the specific parameters proposed by @ChaosLabs.

This is a measured reaction to current developments and avoids having an undue negative impact on Aave V3 Scroll users.

Matching the supply and borrow caps will ensure no additional exposure to Scroll is obtained. Simultaneously, increasing the reserve factor will make it less attractive for suppliers to deposit, which reduces available liquidity and, in turn, incites borrowers to repay due to increased utilisation. This is necessary because of the deteriorating liquidity conditions observed on Scroll.

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.

2 Likes
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Thanks for bringing up the proposal and drawing attention to Scroll.

How is the uncertainty evolving within Scroll governance? I’ve been hearing mixed signals from developers in the Scroll ecosystem, and I’d also like to hear directly from someone on the Scroll team or within the community about where this is heading.

How material is this potential risk, particularly in comparison to other L2s that are centralized and already have Aave deployments?

My concern is that the proposal will primarily affect Aave users of the network and developers building on top of Aave. For example, Ether.fi has a borrowing product tied to the card program, and these material changes would impact those users. While this lending program is relatively small, it represents a real use case beyond the typical point farming we’ve seen in DeFi.

Scroll as an instance is relatively small instance and lower revenue for the DAO so there is more appetite to take firm actions. However, the same case was for Linea, was hanging for quite while at 20M market size and now grew into over 2B market size. I don’t advocate that Scroll will see the same growth trajectory but more of that, it’s rarely straightforward to predict growth of each market.

I need more information until I can make a decision here.

1 Like
5

GM,

The linea Aave TVL increase from 20M to 2.4B was due to Linea Ignition, where they allocated 700M $LINEA tokens (70% of the total 1B allocated to the campaign) as incentives to Euler / Aave markets. That TVL is rented and will probably flee when rewards end. It should start to see a decrease starting as soon as next week since rewards will halve.

Having said that and in regards to Scroll, the DAO and governance community have a TG chat where latest news can be kept tabs with. Happy to share invite links via DM to whoever needs it. Besides last week’s announcement from leadership that the DAO governance will enter a “pause”, there has not been any further official comms about it. This is because the team is still evaluating what to do and how to do it, as it was unclear when they made the announcement.

Besides the business decision to shut the instance down because of the maintenance cost/low revenue disadvantageous relationship, I’m unsure if this lack of clarity regarding the DAO future poses a significant immediate risk for funds in the chain.

1 Like
6

Hi Everyone!

Thanks for raising these important questions. My first time posting on the Aave forum here.

I want to provide clarity on the Scroll governance situation and reassure you that Scroll’s operational stability remains the same.

On the DAO pause: As we mentioned in our recent statement, this is a temporary governance restructuring to drive our organisation forward more cohesively, capitalizing on the momentum building across our ecosystem. As stated in our DAO Constitution, experimentation and governance development are encouraged, and we see this as an opportunity to evolve responsibly. I want to emphasise that this governance pause does not affect any of our user’s fund security, our technical operations, partnerships, or business continuity in any way.

Addressing your concern about user impact: These proposed changes to Aave would negatively impact both Aave and Scroll users, potentially driving Aave users on Scroll towards other chains or other lending products.

Separation of concerns: Our governance model restructuring is separate from protocol operations, similar to how other L2s operate. Aave’s deployment and our support for it continue unaffected by this governance situation.

The proposed risk parameters would hence be a disproportionate response that primarily harms legitimate users while addressing a non-existent technical risk.

On Growth + Business: The current state of Scroll’s post-TGE growth is arguably more sustainable and more sticky compared to the growth spurt pre-TGE. Understandably people get more excited by the former type of growth. With the Etherfi Aave instance growing steadily, trending towards 10k users, and various teams in the Open Campus (opencampus.xyz) program building on Aave, it would be a mistake to undo all the immutable history of running a DeFi protocol of civilisational scale on an open source novel zk-EVM chain. I want to add that we experienced zero downtime during the entire period of having Aave on Scroll. I don’t think anyone outside the ethereum ecosystem can claim that kind of stats.

On Business considerations: I understand that regrettably Aave perhaps didn’t make as much money from this instance than I wish it had, but Aave community members should know what “chainsaw arc” can happen to teams that persist and continue to innovate.

Happy to discuss this further or provide any additional clarity you need.

Thanks for the support Stani as always! Sorry it took me a while to post this… usually not as verbose…

1 Like
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Big thanks to Chaos Labs and LlamaRisk for their analysis.

Aave has grown into “the” major player in DeFi that sets the standard for the whole space, and staying on top of risks and being transparent is not optional, it is essential. As a DAO member, uncertainty is never ideal, so the cautious reaction to the Scroll news and the approach to Risk Parameter Adjustments feels completely reasonable here.

Thank you to Scroll Sandy for taking the time to provide context. Truly appreciated it.