Aave Community Proposes Temporarily Halting ETH Lending Ahead of Merger
The governance vote to approve the pause will begin August 30, 2022 and end September 2, 2022.
New
With the Ethereum merger underway, research and risk analysis team Block Analitica has proposed a temporary pause in Ether (ETH) borrowing to mitigate risks that could lead to an implosion of decentralized finance (DeFi) in the Aave lending protocol during the Merger.
The team highlighted the potential problem of high ETH usage, which can make liquidations difficult or impossible and annual percentage yields (APY) hit negative numbers. Additionally, uncertainties surrounding the merger and a potential Ethereum proof-of-work (PoW) fork may cause liquidity providers to launch a run on banks, pushing usage to even higher levels.
Block Analitica offered several solutions, including temporarily halting ETH lending on the Aave platform and increasing the Variable Annual Borrowing Rate (APR) at 100% usage from 103% to 1,000 %.
In response to the proposal, the Gauntlet Network Market Risk Assessment team expressed support for suspending ETH borrowing. However, they suggested dividing the proposal into two parts and conducting a deeper analysis regarding the second solution presented by Block Analitica.
In the end, community members initiated the vote to approve the suspension of ETH borrowing on the Aave platform. It will start on August 30, 2022 and end on September 2, 2022. With this, community members can choose whether or not they agree to suspend loans.
Related: The Quadruple Bug Bounty for the Ethereum Network – Up to $1 Million Pre-Merger Payouts
Besides DeFi platforms, centralized exchanges have also expressed concerns and put in place countermeasures for the possible implications of the upcoming Ethereum merger. Crypto exchange bin...
The governance vote to approve the pause will begin August 30, 2022 and end September 2, 2022.
New
With the Ethereum merger underway, research and risk analysis team Block Analitica has proposed a temporary pause in Ether (ETH) borrowing to mitigate risks that could lead to an implosion of decentralized finance (DeFi) in the Aave lending protocol during the Merger.
The team highlighted the potential problem of high ETH usage, which can make liquidations difficult or impossible and annual percentage yields (APY) hit negative numbers. Additionally, uncertainties surrounding the merger and a potential Ethereum proof-of-work (PoW) fork may cause liquidity providers to launch a run on banks, pushing usage to even higher levels.
Block Analitica offered several solutions, including temporarily halting ETH lending on the Aave platform and increasing the Variable Annual Borrowing Rate (APR) at 100% usage from 103% to 1,000 %.
In response to the proposal, the Gauntlet Network Market Risk Assessment team expressed support for suspending ETH borrowing. However, they suggested dividing the proposal into two parts and conducting a deeper analysis regarding the second solution presented by Block Analitica.
In the end, community members initiated the vote to approve the suspension of ETH borrowing on the Aave platform. It will start on August 30, 2022 and end on September 2, 2022. With this, community members can choose whether or not they agree to suspend loans.
Related: The Quadruple Bug Bounty for the Ethereum Network – Up to $1 Million Pre-Merger Payouts
Besides DeFi platforms, centralized exchanges have also expressed concerns and put in place countermeasures for the possible implications of the upcoming Ethereum merger. Crypto exchange bin...
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