Discussion: Reducing Long Tail Asset Risk

[Jommi]

So are we going to explore having Gauntlet pay for some of this bad debt as they promised in

Insolvency Refund from Gauntlet

Summary To increase our alignment with Aave and put “skin in the game,” we will refund a portion of our service fee should our risk parameter optimizations incur losses for the DAO during Gauntlet’s engagement. Our ultimate goal is to protect the protocol - we stand behind our work and want the community to have confidence in our optimizations. Motivation Two main motivations are driving this effort from Gauntlet. First, we want to signal our commitment to rigorous risk management for the DA…

You can see from the thread below that:

• They have 0 clue there were risks for bad debt before the Mango Exploiter did his first exploit
• Even then failed to actually provide the right assessments to cover

[ARC] Price Manipulation Implications on Aave: October 2022

The recent Mango market exploit has brought to the forefront of the DeFi community the risk of liquidity attacks on lending platforms. Here is a great Twitter thread from @joshua_j_jim showcasing how the user exploited Mango’s low market liquidity to drain $100M from the Mango market. This liquidity attack reaffirms the high risk of oracle pricing manipulation for low liquidity assets. Gauntlet is continuing to analyze Aave’s V2 assets to measure the future risk of liquidity attacks and will fo…

Why are we paying Gauntlet millions instead of actually putting out a tender for multiple players to offer their risk services to AAVE?

Now, after bad debt is accrued they come with spray and pray effort to save grace and freeze a huge amount of markets.

[ARC] Risk Parameter Recommendations for Aave V2 ETH (2022-11-22)

Summary A proposal to make parameter changes on Aave V2 ETH. Given that the market situation of these assets is currently volatile, out of an abundance of caution, we recommend temporarily freezing the following markets: YFI CRV ZRX MANA 1inch BAT sUSD ENJ GUSD AMPL RAI USDP LUSD xSUSHI DPI renFIL MKR Motivation Aave V2 lacks many of the risk controls that Aave V3 solves for (supply caps, borrow caps, isolation mode, e-mode, etc). Out of an abundance of caution and given the community’s cur…