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Proposal overview

Risk Parameter Updates for Aave V2 assets

Executed

Executed on 

Oct 09, 2021

Simple Summary

A proposal to adjust thirteen (13) total risk parameters across nine (9) Aave V2 assets including LTV, Liquidation Threshold, and Liquidation Bonus.

Abstract

This proposal is a batch update of three risk parameters based on previously selected community risk level preferences. First, a continuation of the two previous liquidation bonus updates, AIP-34: Liquidation Bonus Updates and AIP-38: Liquidation Bonus Updates for Eleven Aave V2 Assets. Second, updated LTV and Liquidation Threshold parameters to realign with the Moderate risk level chosen by the community.

Motivation

This set of parameter updates seeks to maintain the overall risk tolerance of the protocol while making risk trade-offs between specific assets. While increased volatility affected most assets in the ecosystem, some tail assets experienced even higher volatility and larger collateral usage (supply that is significantly borrowed against). In addition, increased liquidity and decreased trading slippage for certain assets allow for lower liquidation bonuses.

Specification

ParameterCurrent ValueRecommended Value
WETH Loan To Value80%82.5%
CRV Loan To Value40%35%
ENJ Loan To Value50%55%
ENJ Liquidation Threshold60%65%
MANA Loan To Value60%65%
MANA Liquidation Threshold65%70%
UNI Loan To Value60%50%
YFI Loan To Value45%50%
YFI Liquidation Threshold60%65%
YFI Liquidation Bonus10%8%
ZRX Loan To Value60%65%
XSUSHI Loan To Value35%30%
USDC Liquidation Bonus5%4%

See below volatility and collateral usage changes from 9/14 to 9/28 that were important drivers for the updated parameter recommendations.

Symbol09-28 Volatility09-14 VolatilityVolatility ChangeCollateral Usage Change USD
WETH1.0120949010.9791917250.032903176-86338828
ZRX1.4747250521.3555409680.119184084-328484
UNI1.5921165991.3244865070.2676300924821417
ENJ1.6601705071.706717325-0.046546818-2369990
YFI1.2489346651.1221332610.126801404-1931790
CRV2.0508758451.6013316640.449544181-2047792
MANA1.5142358631.5109121290.003323734-1420138
SUSHI1.8295577121.4997540670.3298036454744051

Risk Dashboard

The community should use Gauntlet's Risk Dashboard to better understand the updated parameter suggestions and general market risk in Aave V2.

Implementation

The proposal sets the LTV, liquidation bonuses, and liquidation threshold ratios by calling configureReserveAsCollateral on the LendingPoolConfigurator contract at 0x311Bb771e4F8952E6Da169b425E7e92d6Ac45756, using the address and parameters specific to each token.

Copyright

Copyright and related rights waived via CC0.

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Voting results

YAE

331,466

AAVE

100.00%

NAY

0

AAVE

0%

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Votes

State
Executed

Executed on 

Oct 09, 2021
Quorum
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Current votes

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331.46K

320.00K

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Current differential

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331.46K

80,000.00

Total voting power

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Proposal details

Created

Block

5 Oct 2021, 00:11 UTC +00:00

13355761

Started

Block

5 Oct 2021, 00:11 UTC +00:00

13355761

Ended

Block

8 Oct 2021, 00:11 UTC +00:00

13374961

Executed

9 Oct 2021, 00:21 UTC +00:00

Author

Nick Cannon, Watson Fu, Paul Lei