Poll Sentiment: Double AAVE Token Utility: Protocol AND BORROWER Protection

Right now, the AAVE token can be staked and it serves as backend insurance for the protocol. It provides utility to the protocol, but not to the borrower.

What if it didn’t have to be that way? What if it could provide protection to the protocol while also providing protection to the borrower ?

Proposal to allow staked AAVE to be activated as liquidation protection:

Allow users to opt in to using staked AAVE as liquidation protection:

In the event that a user’s health factor falls below 1, approve up to X% (TBD) of the collateral value to be used as liquidation protection. In the event that the health factor falls below 1 even with the added collateral value, the staked AAVE is slashed and taken by the treasury as part of the liquidation.

This could even have the long term potential of adding to yield for stakers if, for example, any slashed staked AAVE from liquidation protection were distributed as part of ongoing yield for stakers vs. just from the existing treasury.

If this is a conceptual direction that people like, I wouldn’t mind a risk assessment from someone with expertise in that area, but wanted to gauge interest in this both from a borrower / staker standpoint.

My thoughts are if it is “opt-in” it’s not really that relevant to the borrower even if they don’t like it because they can simply use the platform as they have been. The stakers I would imagine would enjoy the potential for extra (potentially sustainable) yield / dividend.

I’m interested to hear thoughts on risk / desirability from a protocol standpoint. If the concept is generally agreeable, a deeper dive on what level of protection (vs collateral) is best from a risk lens and if this is feasible within the existing contracts would definitely be needed.

  • Add utility for borrowers (assumes risk parameters met)
  • Keep existing structure

0 voters

1 Like

Yes, I love this it’s perfect. I would love if you did a follow up. You said this is your expertise and as a stakeholder myself I know that I would prefer to have that extra liquidity. Since you’re an expert I would love to hear a follow up. My vote is definitely, Yes, and I hope everyone else votes yes too. Which I’m pretty sure they will if they can afford the gas.

I’m just going to assume this is bait. I dont know why, but you’re gonna have to try harder than this.

Actually, I was dead serious. I really, really believe it is a great idea and wanted to hear more. I would also be interested in what everyone else has to say. I am sorry if this came off in a negative way, that was definitely not my intention at all.I can tend to sound that way in my text at times. It’s me not you, I honestly really like your idea and I think we should discuss it further as a group. I have my Aave staked and since I am putting my coins at risk, with not even much of incentive to stake as I am not a whale. I do not have a bunch of tokens, however, I do have tokens. They are staked, my rewards are not much at all and I believe I should be able to do more with my tokens since I am putting my coins at risk. I’m sorry that came off the way it did. I would love to discuss your idea further and maybe we can move this idea in to real world use cases…

Great idea

Imagine getting liquidated while funds are blocked in the Safety Module