Summary
LlamaRisk recommends the following parameter changes based on user behavior, on-chain liquidity, and position health observed in the latest review of Aave V3 reserves.
Aave V3 X Layer:
- Decrease Slope 2 for USDC from 40.00% to 20.00%.
Aave V3 Gnosis:
- Reduce supply cap for sDAI from 20M to 5M.
- Reduce supply cap for WXDAI from 4M to 1M.
- Reduce borrow cap for WXDAI from 3.7M to 500K.
USDC Interest Rate Model (Aave V3 X Layer)
The recommendation lowers Slope 2 on USDC from 40.00% to 20.00%, matching the USD₮0 curve on the same instance. The optimal utilization point (90.00%), base rate (0.00%), and Slope 1 (4.50%) are unchanged. At the current 89.4% utilization, below the optimal point, the variable borrow rate remains 4.47% APR and the supply rate 3.60% APR.
The change applies only above the optimal point, where it halves the rate increase per point of utilization.
Withdrawal Liquidity
| Instance | Asset | Supplied | Borrowed | Utilization | Idle Liquidity |
|---|---|---|---|---|---|
| Aave V3 X Layer | USDC | 6.72M | 6.01M | 89.4% | 712K |
The optimal utilization is unchanged, so borrow capacity before Slope 2 engages, and the withdrawal buffer at the optimal point (approximately 672K at current supply) is unaffected. Above the optimal point, the lower Slope 2 moderates the rate response to further supply withdrawals, and utilization warrants monitoring while supply continues to decline.
Cap Reductions
The following reductions are proposed due to low secondary-market liquidity for these assets on Gnosis.
- sDAI on Aave V3 Gnosis sits at 23.1% supply cap utilization. The proposed cap of 5M is approximately 1.08x the current outstanding supply, resulting in approximately 92.5% post-change cap utilization.
- WXDAI on Aave V3 Gnosis sits at 19.9% supply cap utilization. The proposed cap of 1M is approximately 1.26x the current outstanding supply, resulting in approximately 79.5% post-change cap utilization. The borrow cap moves to 500K, approximately 1.08x the current outstanding borrows, resulting in approximately 92.3% post-change borrow cap utilization.
Specification
Caps
| Instance | Asset | Current Supply Cap | Recommended Supply Cap |
|---|---|---|---|
| Aave V3 Gnosis | sDAI | 20,000,000 | 5,000,000 |
| Aave V3 Gnosis | WXDAI | 4,000,000 | 1,000,000 |
| Instance | Asset | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|
| Aave V3 Gnosis | WXDAI | 3,700,000 | 500,000 |
IRM
| Instance | Asset | Current Slope 2 | Recommended Slope 2 |
|---|---|---|---|
| Aave V3 X Layer | USDC | 40.00% | 20.00% |
Next Steps
We will move forward and implement these updates via the Risk Steward process. The implemented changes can be reviewed on the LlamaRisk Risk Stewards Dashboard.
Disclosure
This review was independently prepared by LlamaRisk, a DeFi risk service provider funded in part by the Aave DAO. LlamaRisk is not directly affiliated with the protocol(s) reviewed in this assessment and did not receive any compensation from the protocol(s) or their affiliated entities for this work.
The information provided should not be construed as legal, financial, tax, or professional advice.