At first, when @Gauntlet recommended last month the idea of LTV to 0, we were not in favour as we felt this was an attack to a very specific wallet and this is not how DeFi and it’s ethics work.
Now the problem has escalated to a way more critical level and we believe it’s time to send a strong message to that wallet as they’ve been carrying this strategy for a long time.
At the time of writing this, the net APY of the wallet 0x7a16ff8270133f063aab6c9977183d9e72835428 is at -21.40%. This is clearly driving stablecoin depositors out of Aave due to the risks involved.
We acknowledge that it’s possible to bypass V2 and that the specific user is probably capable of applying that method but we’re supportive of putting LTV to 0.
We are also supportive of reducing LT progressively when the market allows it as already voted on this AIP.
We also support the disabling of borrowing for V3 as suggested by @ChaosLabs.
Now regarding the market freeze. We do agree with @WintermuteGovernance’s opinion on limiting protocol exposure.
@MarcZeller has rightfully expressed that a market freeze will potentially block the user of adding collateral and reducing liquidations. He also suggests that a gradual reduction of LTV & LT is the way. As already mentioned, initially we were in favour of this strategy.
We believe this user has had this position for this long as it potentially is one of his major avenues for liquidity. Unfortunately, we’re not in faith that off-chain coordination and encouraging the user to reduce the debt will be successful. If the user has a plan on repayment (especially considering the skewing of APYs on v2), we would love to hear it as a community and then potentially reconsider.
And because of that, we will be in favour of a market freeze.