LlamaRisk is pleased to share our monthly community update for May 2024, highlighting our activities over the past month and our focus areas for the upcoming period.
Highlights
Began our engagement on May 1st, 2024 - the full scope can be found here.
Established communication lines with key stakeholders and delegates, including a biweekly coordination meeting with @ChaosLabs to enhance collaboration.
Worked on 2 explainer articles: GHO Stablecoin and Aave V3 Parametrization, Oracles and Liquidations, expected to be published next month.
Focus for Next Period
Improve our response time to ARFCs, adapting to a faster pace compared to our typical workflow of producing longer-form research articles and in-depth analyses
Publish drafted educational articles on GHO and Aave V3 risk parameters
Follow up on the evolution of Maker’s endgame strategy and collateral types, especially USDe
Continue developing our Aave-specific asset onboarding and risk parameter frameworks
Deep dive into Kelp’s rsETH
We welcome any feedback or suggestions from the community. Please do not hesitate to ask questions, ideas, or areas where you would like more focus from the LlamaRisk team. Special thanks to @ACI and @ChaosLabs, who have been tremendously helpful and welcoming in the onboarding process.
Expanded team capacity by onboarding an additional full-time analyst
Developed internal tooling to monitor governance forum posts, snapshot votes, and market parameters
Upcoming Focus Areas
Complete and publish rsETH comprehensive analysis
Attend EthCC to engage with Aave community members, delegates, and ecosystem partners
Continue educational explainer article series (parametization, oracle, liquidation, irm)
Conduct research on tradeoffs of using market vs. exchange rates
Monitor ongoing loyalty (points) programs and analyze their implications for listed assets in Aave
We welcome community feedback and suggestions. Please share any questions, ideas, or areas where you would like to see increased focus from the LlamaRisk team.
Started a review of the proposed Umbrella and AAVEnomics update to share our queries and observations in the next few days.
Started working on a tool to simulate different slashing conditions
Quarterly report on spending
In addition to the month’s deliverables and in keeping with our original commitment to transparency and accountability, we are pleased to provide our first quarterly report on spending.
Spent 100,283 out of 125,000 GHO claimable in first three months
76% of funds used directly for applied research
We continue ramping up our involvement, onboarding talent, and appointing dedicated resources to Aave. Below is our forecasted spending for the next period:
Ramping up our involvement with the GHO stablecoin
Continue the educational explainer series; we have an article in the works on ChainLink CCIP and its use in Aave
Continue research on tradeoffs of using market vs. exchange rates
Monitor ongoing loyalty (points) programs and analyze their implications for listed assets in Aave
We welcome community feedback and suggestions. Please share any questions, ideas, or areas where you would like increased focus from the LlamaRisk team.
Tradeoffs of using market vs. exchange rates and usage of CAPO framework
Framework for loyalty points programs
Meetings and feedback:
Met with several delegates to gather feedback on our work
Upcoming Focus Areas
Our main priority is to conclude the assessment and make recommendations for the WBTC custody changes. The proposed BUILD GSM integration with BlackRock is also a key area of interest; we are exploring the legal implications and opportunities for integrating RWAs.
Other areas of research include:
GHO user analytics: researching the user profile of GHO to gain insights into adoption trends, collateral usage, user portfolios, and cross-protocol activity
Tooling for historical slippage at different swap sizes
Research on the safe level of asset-specific capitalization for Umbrella
Slashing simulation, which we intend to open-source
Monitor bot for RWA redemption buffer
Further research on supply cap limits (l2 concentration) and usage of cross-chain liquidity for liquidations
We welcome community feedback and suggestions. Please share any questions, ideas, or areas where you would like increased focus from the LlamaRisk team.
Engaged with delegates to gather feedback on recent parameter adjustments and research outputs
In discussions with Chainlink to join a RWA integration task force
Upcoming Focus Areas
Progressing with research on using GHO for liquidations and comparative analysis of CCIP and OFT
Preparing to present the DAO with a proposal to renew our risk provider engagement
Further monitoring and analysis of the WBTC transition process with BitGo and BitGlobal
We welcome community feedback and suggestions. Please share any questions, ideas, or areas where you would like increased focus from the LlamaRisk team.
Overhaul of our onboarding framework, which will include the following:
General Asset Framework
Asset Probation Framework
Chain Qualification Framework
Due diligence on several new assets at temp check stage likely to be considered for onboarding (AUSD, SCR, EURC, FBTC)
We welcome community feedback and suggestions. Please share any questions, ideas, or areas where you would like increased focus from the LlamaRisk team.
[ARFC] Onboard cbBTC to Arbitrum Instance - Liquidity on Arbitrum does not justify onboarding, we asked Coinbase to work towards setting a minimum viable level of liquidity
@ChaosLabs’ launch of Edge. We want to congratulate our peer and acknowledge their contribution . We’ve set up monitoring during the pilot phase to ensure the robots are not misbehaving.
[TEMP CHECK] Aave Instances Strategy Shift - We are very much on board with @ACI’s vision and have signaled we are working on a revised suite of frameworks to support this initiative.
Initiated outreach to Service Providers and Delegates to gather feedback and improve coordination across the ecosystem
Upcoming Focus Areas
We are working on our Asset Probation Framework (APF) and gathering feedback from Service Providers. This will help establish when and how assets should follow a probationary onboarding track, defining success metrics to monitor while maintaining direct onboarding paths for established assets.
We welcome community feedback and suggestions. Please share any questions, ideas, or areas where you would like increased focus from the LlamaRisk team.
Ethena Reserve Fund Drawdown Methodology V2 - Refined reserve fund methodology for Ethena, which is critical for maintaining USDe’s solvency with Aave’s sUSDe liquid e-Mode.
MPCs in Protocol Treasury and Operational Context - Comprehensive analysis of MPC wallets in DeFi, examining their advantages over multisigs, evaluation frameworks, and security best practices for protocol treasury management.
Community Engagement
Continued outreach to Service Providers and Delegates to gather feedback and improve coordination across the ecosystem.
Upcoming Focus Areas
We posted a 2024 yearly recap here, where we highlight our plans for the year. Our engagement and service to Aave DAO remain front and center.
We will continue focusing on key initiatives and delivering outstanding value for the DAO, with efforts to collaborate with other SPs, such as @ChaosLabs. An example of this is a joint proposal that will be submitted shortly to facilitate further growth of USDe within Aave while mitigating key risks.
We welcome community feedback and suggestions. Please share any questions, ideas, or areas where you would like increased focus from the LlamaRisk team.
LlamaRisk presents our January 2025 monthly update, summarizing key activities and outlining upcoming priorities.
Highlights
Recommendations and inputs
Asset onboarding
[ARFC] Onboard Pendle PT tokens to Aave V3 Core Instance - Supporting but advising delayed onboarding due to Ethena exposure risks and recommended two pricing methods to address PT valuation challenges. Pricing PT token is key here, we’ve explored different options and laid out our recommendation.
[ARFC] Add EURC to BASE Aave V3 - Supporting while highlighting concerns about the lack of public audit reports and the absence of a Timelock for upgrades.
[ARFC] Onboard ggAVAX to Aave V3 Avalanche Instance - Recommended a cautious onboarding with a single siloed E-mode, highlighting risks from unaudited smart contracts and centralization under Multisig Labs.
[ARFC] Deploy Aave on Rootstock Network - Supporting with emphasis on rUSDT borrowing against RBTC while highlighting lower security guarantees of its ERC-20 token bridge.
[ARFC] Deploy Aave v3 on BOB - Highlighted early-stage ecosystem with low stablecoin TVL (noted GHO opportunity), centralized network operations, and absence of a public fraud-proof system.
[ARFC] Deploy Aave v3 on Mantle - Supporting onboard with conservative parameters while highlighting concerns about the incomplete fault-proof system and absence of bug bounty.
[ARFC] Deploy Aave v3 on Sonic - Supporting with low initial caps while highlighting concerns about the unclear upgrade management process. @bgdlabs recently posted their own analysis, which should accelerate deployment.
Collaborated with @ChaosLabs on a joint proposal, followed by addressing community concerns through detailed analysis.
Upcoming Focus Areas
Preparing for the release of Umbrella
Analyze and make parameter recommendations for new assets and markets.
Recommendation for legacy/underutilized assets offboarding
We welcome community feedback and suggestions. Please share any questions, ideas, or areas where you would like increased focus from the LlamaRisk team.
LlamaRisk presents our February 2025 monthly update, summarizing key activities and outlining upcoming priorities.
Highlights
Recommendations and inputs
Asset onboarding
[ARFC] Add bCSPX to Aave V3 Gnosis Instance - Recommended onboarding as collateral-only, highlighted pricing concerns, and provided legal commentary on regulatory implications for Aave.
[ARFC] Onboard tBTC to Aave v3 on Arbitrum - Supported onboarding with a focus on using the BTC/USD feed for pricing and recommended a trigger switch mechanism with a PoR feed for user protection.
New Chain
[ARFC] Deploy Aave v3 on Ink - Supported onboarding while highlighting the early-stage DeFi ecosystem (low TVL) and non-availability of Chainlink data feeds.
[TEMP CHECK] GHO Gas Token Framework - Endorsed the framework, emphasizing the planned native bridge and additional functions aimed at increasing GHO usage and supply.
[ARFC] Deploy stataUSDC GSM on Base - Supported deployment with 0% swap fees while cautioning about potential unexpected volatility in GSM deposits.
[ARFC] Add sUSDE to Aave V3 Base Instance - Supported onboarding with conservative parameters and alignment with Aave Core’s sUSDe stablecoin E-Mode setup while emphasizing the low sUSDe supply on Base.
ETH Denver Stable Summit - Delivered a talk exploring stablecoin and asset risks in DeFi, emphasizing qualitative risk assessment methodologies.
Newsletter: This Week in Aave - Launched a weekly newsletter providing a concise roundup of Aave governance updates for stakeholders and users.
Upcoming Focus Areas
Operation Spring Cleaning - Introducing a rating system and a new dashboard for existing partners, focusing on delivering clear recommendations on critical security metrics for assets across DeFi.
Preparing for Umbrella release and methodology for optimal capitalization per asset.
We welcome community feedback and suggestions. Please share any questions, ideas, or areas where you would like increased focus from the LlamaRisk team.
[ARFC] Add stS to Aave v3 Sonic Instance - Supported onboarding while highlighting an OPERATOR_ROLE misassignment to the deployer EOA, which was subsequently fixed by the team.
[ARFC] Add AAVE token to Aave V3 Base Instance - Supported onboarding as collateral-only on Base with conservative parameters due to sufficient liquidity, distribution, and established presencee.
New chain
[ARFC] Deploy Aave v3 on Plasma - Engaging with Plasma’s team to address information gaps, as the network’s early stage makes issuing a recommendation not possible.
[ARFC] Deploy Aave v3 on megaETH - Provided preliminary support for deployment, with asset recommendations to follow as mainnet launch approaches.
[ARFC] Deploy Aave on Soneium - Supported deployment while noting reliance on bridged USDC and USDT due to the absence of natively minted alternatives.
GHO related
[ARFC] Launch GHO on Gnosis Chain - Supported deployment while emphasizing GSMs’ role in fostering GHO growth and enabling sGHO roll-out.
[TEMP CHECK] GHO Aave Savings Upgrade - Recognized the potential benefits of the implementation while highlighting the risk of USDC yield dilution due to increased sGHO supply via stataGSMs.
Collateral Risk Assessment - pufETH - Published a collateral risk assessment, analyzing system architecture, dependency management, smart contract security, oracle integration, market risk, and access control.
Community Engagement
Newsletter: This Week in Aave - Continued delivering weekly roundups of Aave governance updates while enhancing content with deeper insights for stakeholders and users.
Upcoming Focus Areas
Operation Spring Cleaning - Launch is just around the corner, with a dashboard for asset scoring based on access control, security, legal, dependency, and transparency metrics for DeFi protocols.
In the process of peer reviewing and backtesting our methodology for Umbrella liquidity targets.
Monitoring Chainlink SVR V1 (Smart Value Recapture oracles) while providing support and analysis for further parameterization and roll-out.
We welcome community feedback and suggestions. Please share any questions, ideas, or areas where you would like increased focus from the LlamaRisk team.
[ARFC] Add EURC to Sonic V3 Instance - Recommended onboarding conditional on the deployment of a Chainlink EURC price feed, while noting that the EURC on Sonic is a bridged version not natively issued by Circle.
[ARFC] Add EURC to Aave V3 Core Instance - Supported onboarding while highlighting the absence of Circle CCTP support for EURC and the reliance on EOAs for admin roles, with unclear use of MPC wallets
[ARFC] Add EURe to Linea V3 Instance - Did not recommend onboarding due to critically low DEX liquidity, high token concentration, and minimal on-chain supply on Linea.
[ARFC] Onboard eUSDe to Aave v3 Core Instance - Supported onboarding while flagging limited documentation, unverified implementation of features, low liquidity, inactive bug bounty, and a risk profile likely to evolve as more functionalities go live.
[ARFC] Onboard USDtb to Aave v3 Core Instance - Supported onboarding while highlighting low DEX liquidity relative to on-chain supply and high concentration among Ethena-associated wallets.
[ARFC] Add EURC to Avalanche V3 Instance - Supported onboarding while noting lack of Circle CCTP support, use of EOAs for admin roles, and highly concentrated DEX liquidity on Avalanche.
[ARFC] Onboard lisUSD to Aave V3 BNB Instance - Recommended onboarding as a borrowable asset with conservative parameters, highlighting concerns around centralized governance and limited legal clarity.
[ARFC] GHO Savings Upgrade - Supported the revised proposal to implement sGHO & ASR mechanism and provided analysis focusing on critical areas like DAO funding sustainability, the ASR-borrow rate balance, reliance on a single market’s yield, peg stability, and architectural complexity of the proposed architecture.
[ARFC] LRT and wstETH Unification - Supported the proposed parameter changes and E-mode configurations, while conducting an in-depth analysis of potential slashing risks across these LST assets.
[Temp Check] Horizon’s RWA Instance - Expressed availability to assist Aave Labs with confidential design aspects, while raising legal and regulatory questions to enhance clarity for the DAO.
[ARFC] Interest Rate Curve Risk Oracle - Provided our support to the proposal while highlighting the need to carefully manage the risks of centralized risk oracle logic against operational gains.
[ARFC] Aave Umbrella - activation - Shared insights into our Umbrella methodology to recommend parameters and manage risk in collaboration with other members of the Aave Finance Committee (AFC).
Community Engagement
Newsletter: This Week in Aave - Continued delivering weekly roundups of Aave governance updates while enhancing content with deeper insights for stakeholders and users.
Upcoming Focus Areas
[ARFC] Renew LlamaRisk as Risk Service Provider - epoch 3 - Following the successful renewal, we aim to continue centering our services to Aave DAO around in-depth and actionable risk assessments. The key strategic initiatives include Umbrella parameterization, SVR, RWA collaboration, and sGHO rollout support.
In the final stages of deploying a dashboard to monitor and analyze the performance of Chainlink’s SVR mechanism within Aave.
Completed initial peer review and are now finalizing backtesting our methodology for Umbrella liquidity targets.
We welcome community feedback and suggestions. Please share any questions, ideas, or areas where you would like increased focus from the LlamaRisk team.
[ARFC] Add PEPE to Aave V3 - Assessed the asset as onboardable with conservative parameters, while highlighting key reputational and strategic considerations for the DAO.
[ARFC] GHO Cross-chain Parameter Adjustments - Supported the proposal to raise the GHO CCIP rate limit on Base, noting it poses no immediate risks to GHO’s secondary market peg.
E-modes
[ARFC ADDENDUM] Modify E-Modes for PT Token Collateral - Supported adding dedicated E-Modes for PT tokens and their underlying assets to enhance yield-leveraging utility without altering risk, while aiding smoother maturity migrations.
Umbrella
[ARFC] Aave Umbrella - activation - Recommended minor optimizations to USDC and USDT target liquidity using our Umbrella Methodology while supporting the proposed initial parameters.
[ARFC] Asset Parameters Optimization - Supported reserve factor and optimal utilization updates, noting their impact on CRV borrow rates and recommending a Slope1 reduction to offset sharp borrow rate increases.
LlamaRisk’s Aave SVR Dashboard - Deployed a dashboard to monitor and analyze the performance of Chainlink’s SVR mechanism within Aave on various financial and technical metrics.
Newsletter: This Week in Aave - Continued delivering weekly roundups of Aave governance updates while enhancing content with deeper insights for stakeholders and users.
Upcoming Focus Areas
Working on technical improvements to the initial version of our Umbrella Methodology.
LlamaRisk Risk Metrics Dashboard - Advancing to Phase 2, which expands coverage with deeper assessments of currently listed assets (live on Aave) across additional risk dimensions, while onboarding new assets.
We welcome community feedback and suggestions. Please share any questions, ideas, or areas where you would like increased focus from the LlamaRisk team.
LlamaRisk presents our June 2025 monthly update, summarizing key activities and outlining upcoming priorities.
Highlights
Recommendations and inputs
Asset onboarding
[ARFC] Add XAUt to Aave v3 Core Instance - Supported onboarding while flagging lack of bug bounty, no timelock on upgrades, and concentrated DEX liquidity; also shared follow-up analysis on XAUt’s pricing peculiarities to inform the DAO.
[ARFC] Onboard tBTC to Aave v3 on Base - Supported onboarding with a focus on using the BTC/USD feed for pricing and recommended a trigger switch mechanism with a PoR feed for user protection.
[TEMP CHECK] Add XAUt to Aave V3 Core Instance - Provided regulatory clarification confirming TG Commodities as a licensed issuer and requested greater transparency on XAUt operations to strengthen our due diligence.
LayerZero OFT Standard: DeFi Exposure & Risk - Outlined the architecture and risks of the OFT token standard, which underpins $7.4B in Aave deposits, covering smart contract vulnerabilities, price feed dependencies, and legal uncertainties.
Community Engagement
Newsletter: This Week in Aave - Continued delivering weekly roundups of Aave governance updates while enhancing content with a fresh look and deeper insights for stakeholders and users.
Upcoming Focus Areas
LlamaRisk’s Aave SVR Dashboard - Updating the dashboard to monitor and analyze the performance of newly included assets under Phase 3 to Chainlink’s SVR mechanism within Aave on various financial and technical metrics.
LlamaRisk Risk Metrics Dashboard - Advancing to Phase 2, which expands coverage with deeper assessments of currently listed assets (live on Aave) across additional risk dimensions, while onboarding new assets.
We welcome community feedback and suggestions. Please share any questions, ideas, or areas where you would like increased focus from the LlamaRisk team.
[ARFC] Deploy Aave v3 on BOB - Provided asset risk assessments for the proposed onboarded assets: oUSDT, SolvBTC, and xSolvBTC, outlining key considerations for their inclusion in the BOB deployment.
[Direct to AIP] Add USDe to the sUSDe emode Category - Supported the proposal as it enhances capital efficiency and improves user experience by enabling more seamless interaction between USDe and its staked counterpart.
LlamaRisk’s Aave SVR Dashboard - Updated to track financial and technical performance of newly added Phase 3 assets under Chainlink’s SVR.
Newsletter: This Week in Aave - Continued delivering weekly roundups of Aave governance updates while enhancing content with a fresh look and deeper insights for stakeholders and users.
Upcoming Focus Areas
Aave V4 Preparation - Evaluating proposed architectural changes, assessing their implications on risk parameters, and aligning existing risk frameworks to support a smoother transition
We welcome community feedback and suggestions. Please share any questions, ideas, or areas where you would like increased focus from the LlamaRisk team.
LlamaRisk presents our August 2025 monthly update, summarizing key activities and outlining upcoming priorities.
Highlights
Recommendations and inputs
Asset onboarding
[Direct-to-AIP] Add ezETH to Aave v3 Core Instance - Supported onboarding as it enables users to benefit from lower wstETH borrow rates on Core, while noting improvements in ezETH admin multisig threshold and timelock duration.
[ARFC] Onboard USD1 to Aave V3 Core and BNB Instance - Supported onboarding while highlighting USD1 as a new BitGo product, noting lack of public audits, absence of a bug bounty, 92% token supply held by Binance, and high LP concentration.
[ARFC] Deploy Aave v3 on BOB - Highlighted governance and security enhancements for SolvBTC and xSolvBTC, including multisig migration and timelock implementation by the Solv team.
[ARFC] Automation of the Slope2 Parameter via Risk Oracles - Supported exploring this solution to mitigate interest rate shocks for highly utilized assets on Aave’s Core markets and provided analysis centered on discrete repayment behaviors of WETH and USDT borrowers.
Community Engagement
Horizon Collaboration - Engaging closely with Aave, Chainlink, and asset issuers as a Risk Service Provider to support the development of this new market, building robust parameterization frameworks and RWA NAV feeds, thus ensuring transparent and effective risk management.
Newsletter: This Week in Aave - Continued delivering weekly roundups of Aave governance updates while enhancing content with a fresh look and deeper insights for stakeholders and users.
Upcoming Focus Areas
Bug Bounty Roundup - A report analyzing the bug bounty programs for assets currently listed on Aave V3, with planned recommendations for improving coverage, incentivization, and overall protocol security.
Umbrella Early Insights: A detailed case study reviewing the first three months of the Umbrella Safety Module, examining user distribution, staking patterns, and preliminary trends in capital allocation across each module.
Aave V4 Preparation - Actively reviewing the proposed architectural changes introduced in the V4 codebase shared with DAO Service Providers and adapting our current risk frameworks to ensure a seamless transition.
We welcome community feedback and suggestions. Please share any questions, ideas, or areas where you would like increased focus from the LlamaRisk team.
LlamaRisk presents our September 2025 monthly update, summarizing key activities and outlining upcoming priorities.
Highlights
Recommendations and inputs
Asset onboarding
[ARFC] Onboard tUSDe December expiry PT tokens on Aave V3 Core Instance - Recommended halting onboarding following preliminary review of the base asset tUSDe and its PT token, citing insufficient clarity around Terminal DEX mechanics and the full bridging process. We are in the process of clarifying the details and will provide further comments shortly.
[ARFC] Onboard LsETH to Aave V3 Core Instance - Supported onboarding as a collateral-only asset while highlighting risks from limited circulating supply and potentially slow price discovery under stress conditions.
[ARFC] Deploy Aave v3 on Plasma - Supported deployment with a provisional recommendation in light of the chain’s bootstrapping phase.
E-modes
[ARFC] sAVAX LTV & LT Adjustment - Supported the parameter changes and the addition of the new sAVAX/WAVAX E-mode as they introduce minimal incremental risk.
[ARFC] Aave Asset class Allowlist (AAcA) - Shared the initial framework draft with the DAO for feedback. The AAcA provides a structured classification of assets into six groups: Stablecoins, Wrapped Assets, Staking & Restaking Derivatives, Protocol Tokens, Tokenized Financial Instruments, and Specialized & Uncategorized Assets, ensuring clarity for new assets, consistent guidance for community members and SPs, and systematic risk assessment across similar asset categories. The ARFC has later been approved by the DAO and is now in full effect.
[Direct-to-AIP] pyUSD Parameters Optimization - Supported the changes as they pose no incremental risks, noting that the lower borrow APR could increase pool utilization while slightly reducing revenue from the decreased reserve factor.
[ARFC] Safety Module & Umbrella Emission Update - Supported phasing out legacy staking modules, noting a 10 bps WETH Umbrella APR reduction from lower max emissions, and recommended close monitoring of potential user outflows.
[Risk Stewards] WETH Borrow Rate Update - Supported the phased reduction of the WETH Slope1 parameter, highlighting that higher utilization driven by the lower borrow rate reduces available liquidity by $0.36B.
Aave DAO’s State of the Union by ACI - Provided feedback while broadly supporting ACI’s roadmap, and emphasized the value of improving coordination and communication through regular monthly or quarterly calls with all service providers.
LlamaRisk Insights: Umbrella Launch - Delivered a comprehensive performance review of Aave Umbrella Safety Module’s first three months, highlighting a 43% year-to-date reduction in cost per dollar of coverage, enhanced slashing efficiency, and $164M in inflows from non-Aave DeFi venues.
LlamaGuard NAV: Introduced a purpose-built, dynamic risk-adjusted oracle solution for Horizon, developed in collaboration with Chainlink and Aave. Full blog available detailing its architecture and functionality.
Horizon Weekly Highlights - Collaborating with the Horizon team on pre-launch due diligence for assets, we initiated a weekly update summarizing operations, with a focus on utilization metrics, user behavior, and parameter changes.
Bug Bounty Call Out - Launched a weekly Twitter series highlighting assets onboarded on Aave with low bug bounty coverage, providing clear updates and context based on our Bug Bounty Landscape Report.
Newsletter: This Week in Aave - Continued delivering weekly roundups of Aave governance updates while enhancing content with deeper insights for stakeholders and users.
Upcoming Focus Areas
Umbrella Expansion - Recommending the next phase of asset inclusion under Umbrella to achieve optimal Safety Module coverage across Aave markets.
Aave V4 Preparation - Actively reviewing the proposed architectural changes introduced in the V4 codebase shared with DAO Service Providers and adapting our current risk frameworks to ensure a seamless transition.
We welcome community feedback and suggestions. Please share any questions, ideas, or areas where you would like increased focus from the LlamaRisk team.
[Direct to AIP] Onboard XPL on Aave V3 Plasma Instance - Supported the onboarding while noting the asset’s elevated price volatility during launch, and recommended setting conservative parameters, particularly around the liquidation bonus and LTV-to-LT buffer, to mitigate potential liquidation stress.
[Direct to AIP] Onboard syrupUSDT to Aave V3 Plasma Instance - Supported the onboarding while flagging the lack of a timelock on contract upgrades (currently being addressed by the Maple team) and the high LP concentration within a single DEX venue.
[ARFC] Onboard USDai & sUSDai to Aave V3 Arbitrum Instance - Did not support the onboarding due to multiple risk factors, including GPU collateral liquidity uncertainty, the long 7-day sUSDai liquidation window, USDai’s peg instability arising from its capped supply, and legal design considerations that classify it under a risk category not yet approved within the AAcA framework.
[ARFC] Onboard stUSDS to Aave V3 Core Instance - Did not recommend onboarding at the current stage due to several obstacles, including high counterparty concentration, conditional liquidity for redemptions tied to borrowing utilization, a non-standard oracle with manual override capabilities determining collateral pricing, a manual liquidation process, and the fact that stUSDS is explicitly designed to absorb losses from liquidation shortfalls.
[ARFC] Onboard USDG to Aave V3 Core Instance - Supported the onboarding conditional on the establishment of a formal bug bounty program, with collateral use disabled at launch. Highlighted the primary risk being off-chain holding concentration within a single bank.
[ARFC] Onboard stAVAX to Aave V3 Avalanche Instance - Highlighting the introduction of a new 15-day withdrawal mechanism that could create friction for Aave liquidations. Previously assessed risks remain, including limited transparency in protocol function controls via Multisig Labs and 60% of the onchain supply concentrated within three holders.
[Direct to AIP] Onboard syrupUSDT to Aave V3 Core Instance - Supported the onboarding conditional on the establishment of a DEX with meaningful depth, which the team implemented shortly after. Highlighted the circular liquidity dependency arising from all of Maple’s liquid USDT reserves being deployed in Aave, making syrupUSDT redemptions reliant on Aave V3 Core USDT reserve liquidity.
[Direct to AIP] Onboard rsETH to Aave V3 Avalanche Instance - Supported the onboarding while highlighting that 96% of the onchain supply is held within an Euler vault and a single DEX liquidity pool, thereby recommending conservative parameters.
New chain
[ARFC] Deploy Aave v3 on X Layer - Supported the deployment while noting the comparatively low DeFi TVL and activity primarily driven by incentive-based flows, and provided asset-specific recommendations since the proposed assets are new to Aave markets and require individual assessments.
USDG - Supported the listing while noting limited onchain DEX liquidity, with the majority of trading activity occurring through centralized venues.
xBTC - Supported the onboarding while noting that initial demand may remain limited due to low circulating supply and liquidity on the network, with OKX having addressed previously identified legal concerns regarding BTC custody.
OKB - Recommended onboarding while highlighting key risks, such as low and fragmented DEX liquidity.
[ARFC] Launch GHO on Plasma & Set ACI as Emissions Manager for Rewards - Supported the GHO bootstrapping plan for Plasma along with the newly proposed GHO/USDT0 E-mode, while noting the minimal risk exposure arising from temporary USDT borrow rate spikes, which typically self-correct within hours.
Misc.
[ARFC] USDC (old) deprecation on Gnosis Chain Instance - Supported the proposal while recommending an immediate 80% increase to the Reserve Factor and suggesting a full reserve freeze as a more effective alternative to modifying supply caps.
Chaos Labs Risk Stewards - Slope2 Parameter Adjustments for Risk Oracle Deployment - Supported the proposal while recommending increasing the maximum absolute change beyond 4% to enhance responsiveness during market stress, alongside a phased rollout beginning with historically high-utilization reserves such as USDT, WETH, and USDe on Core.
[Direct-to-AIP] Full Deprecation of DPI Across Aave Deployments - Supported the proposal following Chainlink’s deprecation of the DPI price feed and agreed with using a fixed oracle price approach, given the minimal risks posed by already frozen DPI markets.
[Direct to AIP] Enable pyUSD as collateral on Aave V3 Core Instance - Supported enabling pyUSD as collateral while highlighting high DEX liquidity concentration, with the leading pool newly bootstrapped and primarily sourced from a Spark strategy, and recommended closely monitoring liquidity dynamics before further cap adjustments.
[ARFC] Service Provider Compensation Reform for V4 Alignment - Supported the proposal as it increases Aave alignment and the reset streams provide operational certainty and a stable runway for service providers heading into the launch of Aave V4.
[Direct to AIP] Add rlUSD as Collateral - Didn’t recommend enabling RLUSD as collateral primarily due to the absence of a timelock on contract upgrades, along with lack of a bug bounty program and declining DEX liquidity despite supply tripling, while noting the Ripple team’s ongoing efforts to address these issues.
Research and analysis
[ARFC] Umbrella Coverage Expansion - Proposed an update to the existing Umbrella target liquidity levels following a 54% increase in total debt since the mechanism’s initial launch, including raising USDT target liquidity, lowering GHO target liquidity, and adding two new assets, USDe and WBTC, to the safety module, following discussion on the low risks posed by correlated collateral with BGD Labs.
LlamaRisk Insights: Addressing Ethena’s Aave Exposure - Published a long-form analysis examining Ethena’s exposure on Aave and the associated risks from large-scale stablecoin-backed asset deposits into the protocol. The October 10 flash crash reinforced our assessment that the risks associated with USDe exposure on Aave are well contained.
When Pricing Breaks: A USDe Case Study - Examined how collateral pricing design determines system outcomes under stress using USDe during the Oct 10, 2025 market crash as a case study, and outlined a path beyond static pegs using LlamaGuard risk-managed data feeds.
[ARFC] Ethena USDe Risk Oracle and Automated Freeze Guardian - Posted an early-stage proposal for an enhanced Ethena USDe risk oracle and an automated freeze guardian to kick off discussion on fundamental upgrades to Aave’s pricing strategies and support a safe exposure to Ethena’s assets.
Community Engagement
Horizon Weekly Highlights - Continued collaborating with the Horizon team on due diligence for assets, cap changes, and delivering weekly update summarizing operations, with a focus on utilization metrics, user behavior, and parameter changes.
Bug Bounty Call Out - Continued our weekly Twitter series highlighting assets onboarded on Aave with low bug bounty coverage, providing clear updates and context based on our Bug Bounty Landscape Report.
Newsletter: This Week in Aave - Continued delivering weekly roundups of Aave governance updates while enhancing content with deeper insights for stakeholders and users.
Upcoming Focus Areas
Aave V4 Preparation - Actively working on internal V4-related R&D while participating in the Office Hours for DAO Service Providers to align on technical and risk framework updates.
We welcome community feedback and suggestions. Please share any questions, ideas, or areas where you would like increased focus from the LlamaRisk team.
. We’ve set up monitoring during the pilot phase to ensure the robots are not misbehaving.