Compound Finance to impose lending caps in light of failed Aave exploit

Some illiquid altcoins will have their borrowing limit reduced by more than 99%.

On November 28, users of decentralized finance, or DeFi, lending platform Compound Finance passed a proposal to impose restrictions on the maximum borrowing of 10 tokens on the protocol. The proposal was put forward by financial modeling firm Gauntlet and passed by a majority "Yes", although the total turnout amounted to less than 7% of COMP tokens in circulation.

Specifically, tokens such as Uniswap (UNI) and COMP have had their borrowing limits reduced from 11,250,000 and 150,000 to 550,000 and 18,000, respectively. Other less liquid altcoins on Compound, such as year.finance (YFI), have had their borrowing cap reduced from 1,500 to just 20. Coins such as Wrapped Bitcoin (WBTC), which previously had no borrowing limit on Compound, have been capped at 1,250 on maximum borrowing.

Proposal 135 was passed with quorum. ✅

Proposition 135 sets borrowing limits for ten v2 compound markets.

The proposal will be implemented in two days. https://t.co/JvlEPJZrgp

According to Gauntlet, the proposal would prevent "the risk of insolvency related to liquidation stunts", "the Mango price manipulation squeeze exploits", "the risk of high usage" and "the risk of short selling of assets from a short position in a compound of significant size relative to the circulating supply of the asset." Although the related incident was not directly referenced, Gauntlet also performed modeling and risk assessment for the DeFi lending protocol Aave.

November 22 was