LlamaRisk - Monthly Community Update

Governance
23

LlamaRisk - Monthly Community Update

November 2025

Overview

LlamaRisk presents our November 2025 monthly update, summarizing key activities and outlining upcoming priorities.

Highlights

Recommendations and inputs

Asset onboarding

E-modes

Misc.

  • [Direct to AIP] Reinstate Supply and Borrow Caps on Aave V3 Gnosis Instance - Reviewed the proposed parameters and expressed support for the reinstated caps.
  • [Direct to AIP] Freeze wstETH on Plasma - Supported freezing wstETH on Plasma, noting minimal user impact due to low supply and deposits, and highlighted Lido’s planned rollout of the CCT standard across chains, which will require consideration for Aave’s future deployments.
  • [ARFC] Chaos Risk Agents - Supported the proposal and clarified key details with Chaos Labs, noting that Aave Governance will retain the Hub superadmin role and manage all Agent permissions, no additional multisig is expected, automation will rely on the Aave Robot (via Chainlink) with Gelato as a fallback, and the architecture is open source for reuse by all service providers.
  • [ARFC] Remove USDS as collateral and increase RF across all Aave Instances - Supported the proposal to remove USDS as collateral, given its altered risk profile as Sky allocates USDS to additional protocols via Stars, increasing the risk surface of the backing collateral.

Community Engagement

  • Horizon Weekly Highlights - Continued collaborating with the Horizon team on asset due diligence, cap adjustments, and weekly operational updates focused on utilization, user behavior, and parameter changes. As of Week 13, Horizon TVL surpassed $571M, with $176M in net borrows and $294M in stablecoin supply.
  • Bug Bounty Call Out - Continued our weekly Twitter series highlighting Aave-listed assets with low bug bounty coverage, providing updates informed by our Bug Bounty Landscape Report. A notable development: Paxos publicly committed to launching a public bug bounty in Q1 2026 covering their assets (USDG, PYUSD, PAXG, USDP) and related APIs.
  • 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.

24

LlamaRisk - Monthly Community Update

December 2025

Overview

LlamaRisk presents our December 2025 monthly update, summarizing key activities and outlining upcoming priorities.

Highlights

Recommendations and inputs

Asset onboarding

New chain

  • [ARFC] Deploy Aave v3 on Mantle - Supported the proposed parameters, noting MNT as the only new asset for Aave, with supply and borrow cap recommendations to follow based on expected network liquidity from the Mantle team.

E-modes

Legal Commentary

  • [ARFC] $AAVE token alignment. Phase 1 - Ownership - Delivered an independent legal risk analysis clarifying claims of “effectuated protocol ownership” within Aave. The work examined governance-approved funding, IP considerations, and the DAO’s de facto control absent a formal chain of title.

Misc.

Research and analysis

Community Engagement

  • Horizon Weekly Highlights - Continued collaborating with the Horizon team on asset due diligence, cap adjustments, and weekly operational updates focused on utilization, user behavior, and parameter changes. As of Week 16, Horizon TVL surpassed $562M, with $178M in net borrows and $310M in stablecoin supply.
  • Bug Bounty Call Out - Concluded the weekly Twitter series highlighting Aave-listed assets with low bug bounty coverage. Positive outcomes include MetaMask adding mUSD to its $50K HackerOne program and public bug bounty commitments from Paxos (USDG, PYUSD, PAXG, USDP) and StrataFi (PT-srUSDe).
  • 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.

1 Like
25

LlamaRisk - Monthly Community Update

January 2026

Overview

LlamaRisk presents our January 2026 monthly update, summarizing key activities and outlining upcoming priorities.

Highlights

Recommendations and inputs

Asset onboarding

New chain

  • [ARFC] Deploy Aave v3 on Mantle - Supported the proposed caps and analyzed the liquidity conditions for the proposed assets, while highlighting that ongoing liquidity bootstrapping efforts are not yet sufficient to fully support the current cap levels for a few select assets.
  • [ARFC] Deploy Aave V3 to MegaETH - Supported launching with conservative initial parameters, recommending a limited asset set and restricting borrowing to E-Modes enabled by the v3.6 upgrade, allowing flexible collateral isolation and structuring the market around USDm and USDT0 as blue-chip stablecoins.
    • USDm - Supported onboarding of USDm, a white-label stablecoin powered by Ethena, while highlighting the multiple layers of infrastructural dependency involved.
    • BTC.b - Supported onboarding of the Lombard-acquired BTC wrapper with conservative initial parameters until liquidity depth sufficiently matures.

E-modes

Misc.

  • [ARFC] Umbrella Risk Oracles - Supported automating and dynamically calibrating Umbrella parameters, while noting the proposal’s focus on emissions optimization diverges from our DAO-ratified Umbrella methodology centered on external risk factors to Aave. Proposed a collaborative path using our methodology to anchor coverage targets with the Oracle framework, adjusting emissions.
  • [ARFC] Deficit Realization Risk Oracle: Forcing Timely Bad-Debt Recognition via Dust-Collateral Cleanup - Supported the creation of a risk oracle to automate the clean-up of economically insolvent but mechanically non-deficit positions, enabling timely bad-debt recognition and allowing Umbrella to provide coverage without delay.
  • [Direct to AIP] MKR and USDtb Oracle adjustments - Supported updating MKR oracle configurations as liquidity migration to SKY increased volatility and manipulation risk in the legacy feed, and endorsed a fixed 1 USD oracle for USDtb since it is not enabled as collateral, and to mitigate transient volatility from thin liquidity.

Research and analysis

  • Hubs & Spokes in Aave V4: A Risk-Centric Analysis - Published a risk-focused deep dive on the Hubs & Spokes architecture in V4, mapping the theoretical infrastructure design space available to the protocol. The analysis illustrates how liquidity, risk segmentation, and asset integration can be structured using four distinct architectural models and Hub-to-Spoke credit lines, highlighting the trade-offs across different configurations.

Community Engagement

  • Horizon Weekly Highlights - Continued collaborating with the Horizon team on asset due diligence, cap adjustments, and weekly operational updates focused on utilization, user behavior, and parameter changes. As of Week 16, Horizon TVL surpassed $550M, with $151M in net borrows and $335M in stablecoin supply.
  • Newsletter: This Week in Aave - Continued delivering weekly roundups of Aave governance updates while enhancing content with deeper insights for stakeholders and users and in addition provided a 2025 annual recap covering the key upgrades, governance decisions, and growth moments that shaped the protocol.

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.
  • Research on the V4 reinvestment controller

We welcome community feedback and suggestions. Please share any questions, ideas, or areas where you would like increased focus from the LlamaRisk team.

2 Likes
26

LlamaRisk - Monthly Community Update

February 2026

Overview

LlamaRisk presents our February 2026 monthly update, summarizing key activities and outlining upcoming priorities.

Highlights

Recommendations and inputs

Asset onboarding

  • [Direct to AIP] Onboard BTC.b to Aave V3 Core Instance - Supported onboarding following the successful migration to Lombard’s security model, noting protocol-supplied DEX liquidity, low onchain supply, and the presence of robust administrative safeguards, including a timelock and active bug bounty.
  • [Direct to AIP] Onboard sUSDe and USDe to Aave V3 Base Instance - Supported onboarding contingent on improved liquidity conditions, while noting the absence of a timelock and low onchain supply on Base.
  • [ARFC] Deploy Aave V3 to MegaETH: cUSD & stcUSD - Provisionally supported onboarding subject to improved liquidity depth, noting the absence of a native cUSD/USD feed (temporarily relying on USDC/USD given >95% USDC reserves) and the lack of a bad-debt handling mechanism for loaned reserves, which could overstate cUSD value in a backing loss scenario.

New chain

  • [ARFC] Deploy Aave v3 on X Layer - Supported the initial parameter setup and onboarding of a strategic subset of native “xAssets,” while limiting the broader market to stablecoin borrowing (USDT0, USDG, GHO) via specialized E-Modes.
    • xSOL - Supported onboarding of xSOL, an OKX-managed wrapper, while highlighting centralized management via MPC-based access controls and noting that the SOL/USD price feed remains under development.
    • xOKSOL - Supported onboarding of xOKSOL, the first Solana-based LST on Aave, while highlighting limited liquidity and the absence of a SOL/USD oracle feed, which remains a prerequisite for onboarding.
    • xETH - Supported onboarding with conservative supply caps and risk limits, highlighting high supply concentration in OKX-linked addresses and low DEX TVL, and emphasizing the need for greater non-OKX holder dispersion and diversified liquidity over time.
    • xBETH - Supported onboarding of xBETH, a yield-bearing wrapper of OKX’s internal BETH with a monotonic exchange rate updated on a 24-hour cadence, while highlighting limited DEX liquidity and residual risks tied to validator performance on OKX’s Prysm stack, off-chain slashing coverage commitments, and redemption timelines (13 days to several weeks).

E-modes

  • [ARFC] Introduction of Segregated Bluechip Collateral E-Modes on Aave v3 - Supported the proposal as it offers a distinct value proposition for risk-averse borrowers aiming to eliminate rehypothecation risk; recommended aligning LTV/LT with Isolated Bluechip E-Modes, standardizing a 5% LB across segregated BTC markets, and gating sWETH supply cap increases based on core WETH utilization to preserve looping stability.

Legal Commentary

Misc.

Research and analysis

  • Unlocking Yield: Aave V4’s Reinvestment Controller - Presented a data-driven framework to deploy idle protocol liquidity, noting that Aave averaged $1.16B in idle USDT in 2025, and outlining how allocating this float to low-risk yield strategies (e.g., money market funds or short-term Treasuries) could enhance deposit rates and create a sustainable revenue stream for the DAO.
  • LlamaRisk Insights: Institutional Legal Setup for Reinvestment Controller - As a follow-up to our V4 Reinvestment Controller research, outlined practical pathways for Aave DAO to access regulated off-chain products (e.g., fund subscriptions and institutional lending), including considerations for establishing a legal entity to act as the DAO’s contracting agent.
  • Retro: WETH utilization spike and Slope2 Risk Oracle performance - Published a report analyzing Slope2 oracle behavior during two volatility-driven WETH utilization spikes on Aave V3 Ethereum Core, and requested a detailed post-mortem and greater transparency from ChaosLabs regarding delegated rate-setting mechanisms.
  • LlamaRisk Insights: Custom Stablecoins — A Retail Opportunity for Aave - Analyzed the emergence of institution-issued custom stablecoins and outlined how Aave, particularly through V4’s Hub-and-Spoke architecture, can leverage issuer distribution networks to position itself as a scalable yield and savings layer for institutional-grade stablecoin ecosystems.

Community Engagement

  • Horizon Weekly Highlights - Continued collaborating with the Horizon team on asset due diligence, cap adjustments, and weekly operational updates focused on utilization, user behavior, and parameter changes. As of Week 26, Horizon TVL is around $446M, with $99M in net borrows and $304M in stablecoin supply.
  • 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 the LlamaRisk team to focus more.

2 Likes
27

LlamaRisk - Monthly Community Update

March 2026

Overview

LlamaRisk presents our March 2026 monthly update, summarizing key activities and outlining upcoming priorities.

Highlights

Recommendations and inputs

Asset onboarding

New chain

  • [ARFC] Aave V4 Activation on Ethereum Mainnet - Provided a consolidated analysis of the hub-and-spoke architecture configuration, liquidation parameters, collateral factors, interest rate model settings, and Add/Draw Cap recommendations.

GHO related

  • [Direct-to-AIP] Increase GHO GSM Capacity on Plasma - Supported minting and bridging an additional 50M GHO to the Plasma GSM driven by strong incentive-led demand, while recommending close monitoring of further GSM expansion due to its impact on the USDT0 market on Aave V3 Plasma.
  • [ARFC] sGHO Launch Configuration - Supported the proposed upgrades to the staked GHO product, including the native yield via ERC-4626 savings vault, while noting the need for frontend safeguards to disable legacy deposits and guide users toward migration.

E-modes

Legal Commentary

  • [TEMP CHECK] Aave V4 Licensing - Supported the proposed V4 licensing framework, including providing legal review and draft suggestions in respect of the BUSL license and the CLA.

Misc.

Research and analysis

  • LlamaRisk Insights: USDtb Ownership Changes - Conducted an updated legal review of USDtb following ownership changes, highlighting a tri-party issuance framework (Ethena Labs, Pallas BVI, Anchorage Digital Bank), creation of a dedicated Reserve Trust, and clearer legal distinction between token holders and onboarded clients, with analysis on the resulting impact to the stablecoin’s risk profile.
  • Post-Mortem: Exchange Rate Misalignment on wstETH Core and Prime Instances - Assessed root causes and identified gaps in testing and transparency across delegated risk infrastructure, proposing structural improvements including enhanced oversight and LlamaRisk co-signing authority via the RiskSteward role to prevent recurrence.
  • LlamaRisk Insights: Ethena sUSDe Dynamic Cooldown - Analyzed Ethena’s proposal to introduce a dynamic sUSDe unstaking cooldown, replacing the current fixed 7-day period. The proposed mechanism aims to improve the user experience while enhancing secondary-market price stability, which is critical to maintaining sUSDe’s reliability as collateral on Aave.

Community Engagement

  • Horizon Weekly Highlights - Continued collaborating with the Horizon team on asset due diligence, cap adjustments, and weekly operational updates focused on utilization, user behavior, parameter changes, and a broader macro market overview. As of Week 30, Horizon TVL is around $368M, with $110M in net borrows and $219M in stablecoin supply.
  • 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

  • SVR Dashboard - Working on integrating newly expanded Aave markets on Base and Arbitrum into the SVR analytics dashboard.
  • Numerous initiatives to support Aave V4 launch and expansion.

We welcome community feedback and suggestions. Please share any questions, ideas, or areas where you would like the LlamaRisk team to focus more.

1 Like
28

LlamaRisk - Monthly Community Update

April 2026

Overview

LlamaRisk presents our April 2026 monthly update, summarizing key activities and outlining upcoming priorities.

Highlights

Recommendations and inputs

Asset onboarding

  • [ARFC] Onboard PT-USDG-28MAY2026 to Aave V3 Core Instance - Supported onboarding given the long maturity horizon, which justifies integration efforts, while noting the strong liquidity available in the corresponding Pendle pool.
  • [ARFC] Onboard USDai & sUSDai to Aave V3 Arbitrum Instance - Supported onboarding following improvements since the initial assessment, including Barker value warranties for new loans and migration from $wM to PYUSD reserve assets, while noting worsening liquidity and remaining regulatory uncertainties, and therefore recommending conservative initial parameters.
  • [Direct-to-AIP] Onboard USDe to the Aave V3 MegaETH Instance - Supported onboarding as USDe is already well established across Aave markets, noting that its MegaETH deployment pass-throughs yield similarly to sUSDe, eliminating the need for a separate sUSDe listing for yield looping strategies.

New chain

  • [ARFC] Aave V4 Activation on Ethereum Mainnet - Proposed the first and second rounds of add and draw cap increases across the Core, Prime, and Plus hubs, expanding deposit capacity by $55M and bringing the total add cap ceiling to $80M.

E-modes

Misc.

Research and analysis

  • [ARFC] Umbrella Emission Adjustments - Proposed updating Umbrella emissions on V3 Core following declines in underlying aToken yields and significant increases in the DAO’s first-loss deficit offset, which reduce slashing risk and justify lower incentive levels.
  • [Direct-to-AIP] Aave V3 Scroll Instance Deprecation - Proposed freezing all reserves on the V3 Scroll instance citing rapid deterioration in onchain liquidity and TVL following ether.fi Cash’s migration to OP Mainnet.
  • rsETH incident — 2026-04-18 - Provided details to the community and stakeholders on a potential rsETH exploit and the Guardian’s precautionary freezing of affected markets across deployments, while emphasizing that Aave pools remained safe and operational. Also provided updates on subsequent Risk Steward actions, including Slope2 reductions to maintain sustainable borrow rates.
  • rsETH Incident Report (April 20, 2026) - Published a detailed report covering the Kelp LayerZero exploit, Aave’s exposure through attacker positions, defensive actions taken by the Aave Protocol Guardian and Risk Stewards, potential bad debt scenarios, and proposed coverage plans.

Risk Stewards

The following proposals were published by us to update risk parameters via risk stewards and AIP:

Community Engagement

  • SVR Dashboard - Integrated newly expanded Aave markets on Base and Arbitrum into the SVR analytics dashboard.
  • Chaos Labs Is Leaving Aave - Assured the community that LlamaRisk is prepared to ensure full continuity of risk services and address any operational gaps following Chaos Labs’ departure, with further details provided in the accompanying post.
  • LlamaRisk: Ensuring Continuity of Aave’s Risk Management - Published a detailed overview of our existing responsibilities and a two-phase transition plan, including immediate co-ownership of Manual Risk Steward controls with Aave Labs and a future migration of Automated Risk Steward functions toward a protocol-owned CRE-based architecture.
  • Horizon Weekly Highlights - Continued collaborating with the Horizon team on asset due diligence, cap adjustments, and weekly operational updates focused on utilization, user behavior, parameter changes, and a broader macro market overview. As of Week 32, Horizon TVL is around $365M, with $112M in net borrows and $213M in stablecoin supply.
  • Newsletter: This Week in Aave - Delivered 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 4 - Submitted our renewal proposal as Aave’s Risk Service Provider approaching one year of engagement, with focus on absorbing departing risk functions and ensuring full V3, V4, and Horizon coverage through protocol-owned CRE-based risk infrastructure.
  • Numerous initiatives to support Aave V4 launch and expansion.

We welcome community feedback and suggestions. Please share any questions, ideas, or areas where you would like the LlamaRisk team to focus more.