Gauntlet recommendation for WETH Uopt on Ethereum v3
Our Vote: Option 3: 0.9 (no change)
Our Rationale:
Liquidity:
- Gauntlet brought up very reasonable liquidity concerns about wETH. However, their analysis is based on the assumption of no debt repayment which is extreme.
- Even with 100% utilization, liquidators can get aWETH with a bonus and earning at really high return (while 100% utilization lasts).
v2 → v3 migration:
- The proposal would make v2 more attractive than v3, which hurts the migration.
Revenue
- lowering the change makes recursive borrowing less attractive on Aave, we don’t want that for one of Aave’s best revenue-generating assets.