Spotlight: GR14 🔦

GR14 is live until June 23rd: Donate now including to the Crypto Advocacy cause round 🤖🌍 Plus you can be eligible to mint a Lens handle 🌿

Risk 🔎

In case you haven’t seen it, check out the AAVE V2 Risk Dashboard by Gauntlet at gov.gauntlet.network/aave. Gauntlet has also launched the AAVE Arc Risk Dashboard. The Gauntlet team is particularly keen on iterating on this dashboard for the community and would love feedback via this Google Form.

For more details on how Gauntlet manages market risk for AAVE, please see Gauntlet’s Parameter Recommendation Methodology and Gauntlet’s Model Methodology.

Staked ETH and AAVE Risk:

Details can be found in this AIP

stETH has emerged over recent months as one of the most popular collateral types on AAVE. Many users have deposited stETH and borrowed ETH against it. This means that if those prices diverge or the asset “depegs,” there could be a lot of liquidations in AAVE. There has been much speculation on the risks posed by a stETH/ETH price depeg on the protocol.

Starting June 10, Gauntlet observed a large spike in AAVE Value at Risk due to volatility in stETH price and immediately investigated it further. In AIP-83, Gauntlet proposed the following steps to mitigate the chance of a liquidation spiral negatively impacting AAVE tokenholders and users:

Freeze the stETH market
Increase LT for stETH to 90%
Pause ETH borrowing

On June 15, an updated analysis regarding the stETH/ETH price deviation and largest user positions no longer necessitated the AIP-83 changes. As such, Gauntlet requested abstaining from the vote.

Proposal AIP-83 has failed as per our updated recommendation above. Gauntlet continues to monitor stETH and the broader market and will share a post-mortem with the AAVE community.