# Gauntlet Aave V3 E-mode Methodology

**URL:** <https://governance.aave.com/t/gauntlet-aave-v3-e-mode-methodology/12278>\
**Category:** Governance\
**Created:** [March 14, 2023, 3:27am UTC](https://governance.aave.com/t/gauntlet-aave-v3-e-mode-methodology/12278 "2023-03-14T03:27:11Z")\
**Posts on this page:** 1\
**Showing post:** 14

<div class="post-metadata">

**Author:** ![ChaosLabs](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/chaoslabs/32/6850_2.png) [@ChaosLabs](https://governance.aave.com/u/ChaosLabs)\
**Post date:** [March 23, 2023, 9:19pm UTC](https://governance.aave.com/t/gauntlet-aave-v3-e-mode-methodology/12278/14 "2023-03-23T21:19:43Z")

</div>

Chaos Labs is supportive of option #1, which aims for a target LT of 87%, as we stated in our [Methodology post](https://governance.aave.com/t/chaos-labs-e-mode-methodology/12357/3). Additionally, to further protect retail users from liquidations, we propose setting a slightly more conservative LTV at 80%, keeping a wider margin from the LT.

> [@Chaos Labs - E-Mode Methodology](https://governance.aave.com/t/chaos-labs-e-mode-methodology/12357/3):
>
> Following internal discussions and considering community feedback, Chaos Labs recommends **Conservative parameters and a wider range of assets** as the most viable solution. The main reasons for this recommendation are:\*
> 
> 1. _Inclusivity: this option is more inclusive, particularly for USDT, which has a market capitalization that is twice that of USDC and DAI combined. By including USDT as a borrowable asset, E-Mode will be more accessible to a wider user base._
> 2. _Conservative LTs: More conservative LTs will better accommodate more significant short-term de-peg events, providing users with greater stability and security._
> 3. \*User experience: Increasing the LTs is always possible, but decreasing them can have a significant negative impact on user experience and liquidations. Therefore, starting with a lower LT is a more prudent approach.

Finally, if the suggested option is approved, we propose removing non-USD pegged assets, specifically agEUR and EURS, as they are unlikely to be mean-reverting or correlated. We agree that for simplicity, this decision could be made following the proposed changes above.

* * *

If the community does choose this option, it is important to provide alternative approaches for achieving the desired LT while having minimal impact on existing positions.

To address this, we suggest three alternative paths, each accompanied by data for each chain:

1. **A 10.5% reduction** (below is the data on liquidations for this reduction)

 ![Untitled (32)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/0/01650af6ed030e065b466f8fd635d3256ba7020b.png)

1. **A 5.5% reduction, followed by another 5% decrease** (below is the data on liquidations for the first 5.5% reduction)

 ![Untitled (33)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/1/11785172087ac4f0f072edceccba5e916a2e4125.png)

1. **Three separate reductions of 3.5% each** (below is the data on liquidations for the first 3.5% reduction)

 ![Untitled (34)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/a/aae7ca9105c639ef929e274bcb7eb08efc3e59b0.png)

### Liquidation amounts per E-Mode LT

 ![Untitled (35)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/b/bc7c2213e7c1d14da852588aca27910a4292592f.png)

 ![Untitled (36)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/c/c4f667e53f304bad2a2436cf9512dc68d903d99c.png)

 ![Untitled (37)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/6/6c5176c4fe36acc2b4216cdf9050920b777a1122.png)

 ![Untitled (38)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/a/a53fadaa7acf767c1450203868f37f62ec944be9.png)

Based on the above information, we recommend implementing three consecutive 3.5% reductions to mitigate the impact on liquidations and user experience.  
_Note: Option 2 (A 5.5% reduction, followed by another 5% decrease) could be viable for Optimism and Arbitrum, but we prefer to be consistent with parameter settings across all chains._

---

_[View the full topic](https://governance.aave.com/t/gauntlet-aave-v3-e-mode-methodology/12278)._