A recap of the Aave ecosystem, May 9th to May 15th
appreciates Aave’s risk management Spotlight 🔦 | Risk 🔎 | Protocol 📰 | Ecosystem 🧉 | Governance ⚖️ | Events 📆 | Hey Anon 👻
Stani on the ‘DeFi State of the Union’ panel
gov.gauntlet.network/aaveGoogle Form
Gauntlet’s Parameter Recommendation MethodologyGauntlet’s Model Methodology
Risk Parameter Updates:
Due to market conditions around UST and related oracle unreliability, Gauntlet proposes freezing UST.
Due to current uncertainty around the stETH peg, Gauntlet also proposes increasing stETH liquidation threshold to 81% and decreasing stETH LTV to 69%. Currently, stETH liquidation threshold is 75% and stETH LTV is 73%.
This will allow borrowers using stETH as collateral with more buffer in case stETH continues to depeg, and thus decrease the chances of liquidation cascades that lead to insolvency on the Aave platform. stETH LTV will also be decreased, so new positions will not be able to take on riskier positions using stETH as collateral. Our analysis indicates that an 81% liquidation threshold for stETH should allow for the protocol to withstand an additional 10% depeg from stETH and ETH price. Gauntlet's simulations of the Aave protocol indicated that a decrease in LTV to between 66-69% and an increase in liquidation threshold to 81-82% could significantly decrease liquidation volume as well as total insolvencies while minimally decreasing capital efficiency.
