Risk Parameters for DAI Update
Vote : YAE
Reasoning: Maker’s D3M model allows MakerDAO to extend a direct credit line to various lending protocols with the goal of controlling the maximum variable interest rate for borrowing DAI.
Maker has used this to extend a $300 million credit line of DAI to Morphos’ vaults, with proposals to increase the credit line up to $600 million. This Morpho vault strategy borrows USDe against Maker-supplied DAI — accruing yield from USDe’s delta-neutral funding rate strategy. The DAI deposited in this strategy is grouped into various tranches of risk, ranging from 77% to 94.5% LLTV debt positions.
As Morpho vaults utilize Aave, a liquidation event in Maker’s D3M Morpho strategy could lead to second-order effects on the Aave protocol.
To mitigate this risk, two options for DAI collateral parameters were suggested:
- Update DAI LTV to 0%, freezing the borrowing power of DAI.
- Update DAI LTV to 63% and incrementally lower it based on DAI strategy allocation.
Some considerations:
- There is approximately $350 million in DAI on Aave. Completely freezing these markets as collateral is a very drastic measure.
- On Morpho, USDe is hardcoded to $1, which prevents large liquidation cascades even if the oracle price of USDe depegs. According to ChaosLabs analysis, the lowest funding rate ever recorded would give the 94.5% LLTV pools 9 days to repay debt before falling below liquidation values.
- Maker is incrementally extending the credit line by $100 million with input from their risk teams.
We support the conservative measure, as these parameter changes will increase the safety of the DAI Morpho vaults while still maintaining DAI’s utility on Aave.
Risk Parameter Updates GNO on v3 Gnosis
Vote: YAE
Reasoning: GNO is an isolated pool on Aave v3 Gnosis. Currently, there is one large position with 18k GNO collateral that has borrowed $840k of stablecoins (Health factor 2.5).
Given that the pool is isolated and the borrow ceiling of $1m has been reached, we recommend raising the borrow caps to $2m and slightly adjusting the LTV ratios.
Onboard Llamarisk as a Risk Provider:
Vote: YAE
Reasoning: LlamaRisk was established in 2021 as a service providing analysis for Curve. In 2023 they partnered with Prisma, and now offer generalised risk strategies to various platforms.
Their proposal encompasses the following scope:
- On-demand risk assets.
- Collaboration with Chaos Labs.
- Active involvement in DAO governance.
- Legal, regulatory, and policy work.
Their unique expertise lies in deep knowledge of stablecoin design, particularly having worked with crvUSD.
Requested Compensation: $250,000
We voted for LlamaRisk based on their previous experience. Additionally, we believe that their expertise with crvUSD contributes to growth and maintenance of GHO. We were also impressed with their analysis in the DAI parameter discussion here.
Vote: YAE
Reasoning: This AIP is a continuation of the series of incremental increases to the Reserve factor to migrate liquidity from Aave v2 to Aave v3.
Vote: YAE
WeETH is a Liquid Restaking Token provided by Ether.fi. EtherFi currently has 1.25 million ETH staked (valued at $3.91 billion USD) as weETH. In addition to having withdrawals enabled, weETH boasts large liquidity pools, including $21 million on Thruster and $58 million on Uniswap.
On Aave, on-chain data indicates that the majority of these positions are employing looping strategies, supplying weETH and borrowing ETH. These positions carry lower risk as the assets are highly correlated, meaning that changes in collateral value are mirrored by the debt value.
WeETH is redeemable for ETH at a 1:1 ratio, which limits the risk of liquidation for looping accounts. Additionally, the recommended borrow cap remains small compared to the supply cap (48k vs. 3200). For these reasons, we agree with updating the weETH parameters.
Vote: YAE
Reasoning: Aero is the leading native DEX on base with a market cap of $460m and total value locked of $700m. AERO has extremely deep liquidity ($80m), and is listed on Tier 1 exchanges such as Coinbase and Kucoin.
Based on AEROs liquidity levels and dominance in Base Defi, we believe AERO can be successfully added to Aave v3 Base markets.
Hyperlane bridge adapter update to V3
Vote: YAE
Reasoning: Standard Technical Proposal from BCG
Vote: YAE
Reasoning: GHO staked in the safety module offers several benefits:
- It serves as a protocol buffer in case of a shortfall event.
- It contributes to the stability of GHO through a 20-day lockup period, potentially leading to revenue after the Aave FASTPASS proposal.
- It generates demand for GHO as a yield-accruing Stablecoin.
Increasing emissions from 50 to 100 stAAVE per day will make rewards more attractive and incentivize more deposits for the GSM. Based on our calculations, these incentives result in a 15.7% APR, which is competitive for stable rates.
Hyperlane bridge adapter update to V3
Vote: YAE
Reasoning: Standard Technical update by BCG Labs.
aAMPL Second Distribution
Vote: YAE
Reasoning: The aAMPL problem has been extensively discussed on Aave’s governance forum. While $300k has already been allocated as an interim solution, this second payment of $758k will serve as the final contribution from Aave. Following this, aAMPL will compensate 40% of the total, ensuring full reimbursement for aAMPL holders.
Vote: YAE
Reasoning: We voted Yes to the Snapshot vote.
Updating weETH Risk Parameters
Vote: YAE
Reasoning: We voted Yes to the ARFC.
Polygon V2 Reserve Factor Updates & Interest Rate Increases:
Vote: YAE
Reasoning: This is a continuation of incremental updates to offboard collateral from V2 Markets.
[ARFC]. BGD. Aave v3.1 Cantina competition
Vote: YAE
Reasoning: Security is the backbone of Aave, and with the launch of Aave 3.1, all security procedures need to be emphasized. We encourage competitions for white hat hackers - payments will only be made if security errors are found, in which case the payment is well worth it.
[TEMP CHECK] Onboard tBTC to Aave v3 on Ethereum, Arbitrum and Optimism
Vote: YAE
Reasoning: tBTC is a pegged ERC20 token redeemable 1:1 for Bitcoin on the BTC network via the Threshold permissionless bridge. tBTC serves as a decentralized alternative to wrapped Bitcoin. While the underlying BTC of wBTC is held by a centralized group of custodians, tBTC is held by a decentralized network of nodes.
Currently with a market cap of $191.6 million, tBTC has liquidity pools against WBTC and stablecoins on Curve and Uniswap. Aave listing tBTC will enable tBTC holders to earn yield on their Bitcoin, thereby enhancing asset diversity on Aave and providing users with alternatives to centralized wBTC, which holds a significant market share (wBTC has a market size of $2.03 billion on Aave v3 Ethereum Mainnet).
[ARFC] ACI Phase III - “Ad Astra”
Vote: YAE
Reasoning: We echo the communities opinion and support extending Aaves’ collaboration with ACI for an additional year. ACI has contributed strongly to Aave through their initiatives of Skyward and Dolce Vita. Skyward has streamlined the governance process from the ARFC to the AIP stage, and “Dolce Vita” manages essential operational processes for the DAO.
We are excited for ACI to expand their services through the “Ad Astra” growth phase. Given ACIs’ effort and commitment to the DAO, we are supportive of this proposal.