[TEMP CHECK] Integrate Oval for the BAL & SNX Ethereum V3 Markets

Thanks @UMA for the TEMP CHECK submission, and props on the innovation being brought to the space.

Even if the solution seems reasonable, from a high-level perspective, we think that most probably the community should not take an integration decision like Oval’s lightly, and do introspection about alternatives. The rationale is the following:

  • First and foremost, liquidations is arguably one of the most important mechanism of Aave and similar protocols, and given the stakes, stability is key. Yes, it can be improved, but it should be deeply evaluated from all perspectives: technical, risk, strategy.
  • Auctions-based systems introduce without doubt additional centralisation. We agree that the suggested architecture seems to not add major trust compromises, but by nature, these type of designs add some dependencies.
  • Having a high liquidation bonus is a pessimistic approach to security on liquidations. The idea is the following: it is perfectly fine to overpay liquidators if that means that Aave will be really attractive on market distressed scenarios. The goal of the liquidation bonus is not maximising profit for the DAO, is about protecting all users.
  • A system with deeper integration directly with the price provider of the protocol (Chainlink) seems a more promising direction to explore, reducing any external dependencies, a strategy what we usually defend on critical components. We welcome comments and ideas from representatives of Chainlink on the topic.
  • This type of decisions should be holistic. No matter if the technical integration looks first sight trivial or if starting with only a reduced number of assets, the operational cost could be relatively high.
  • Innovation on top of Aave’s liquidation system could be a good area to improve together with AAVE token dynamics. If that’s the case, we don’t think that should be done by a party with no history with the DAO.

In summary, from the technical side, we think it is probably better to hold on the integration of a system like Oval, and study deeper if it is good long term for Aave, and potential alternatives.
We will try to come up with some idea to consider by the community.