[TEMP CHECK] BGD. Further Aave v1 deprecation strategy

Development
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Final Phase 3


Phase 2 was executed on March 3th resulting in a reduction of more than 200’000 of debt.

For next steps, when looking into the previously suggested Phase 3 in detail, we noticed that a “force withdrawal” could permanently lock funds on some contracts that are not intended to ever receive the underlying.

We did some research into different alternative (e.g. merkle distribution-based), but again there might be contracts holding funds that will not be able to claim (one of the biggest holders of aLINK is an iEARN vault with no ability to claim). While looking into crafting a custom solution for iEARN users, there are >3000 contracts holding funds and there is no way to ensure a seamless transition for everyone (especially as some of the contracts are not verified).



Therefore for this final Phase 3 we suggest the following:

  • Do a final increase of the static Liquidation Bonus from 3% to 5%.

  • Disable the asset-specific liquidationBonus in favor of always using the static one. While this might reduce the Liquidation Bonus for some positions, it will allow a code optimisation to reduce liquidation gas cost by more than 60%, which should have a major effect on the profitability of liquidating small positions.

  • Replace the interest rates of all assets with one with flat 0 parameters.

  • Disable all functions on v1, apart from liquidationCall, repay and withdraw.

  • Inject funds from the Aave Collector for users to be able to withdraw, to compensate the minor bad debt accrued since the inception of v1 years ago. The amounts to be proposed are the following:

    • 15’000 DAI.
    • 17’000 TUSD.
    • 9’500 USDC.
    • 2 ETH.
    • 2’000 sUSD.
    • 6’500 BAT.
    • 0.025 MKR.
    • 6’500 MANA.
    • 0.02 WBTC.
    • 6’000 BUSD.

    This is a slight overestimation to give users room to withdraw, even before debt is being repaid. The exact amounts needed might vary slightly due to liquidations. Once users have withdrawn their funds the DAO can claim back the assets left.


We want to highlight something: after this final Phase 3 is executed, Aave v1 will not be maintained anymore, anyhow, because the only off-boarding path is for users themselves to withdraw their funds.
There will be no more maintenance & support, in addition to the lack of coverage already approved by the community time ago.

We highly recommend users to migrate & interface maintainers to highlight the deprecation on their UIs.



In the following days, we will be creating the on-chain governance proposal for this Phase 3.

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