On the morning of September 19, AAVE 's discussion forum announced a proposal to adjust lending parameters related to WBTC collateral.
AAVE Proposes Parameter Changes to Minimize Impact from WBTC
The proposal was announced by advisory unit LlamaRisk in AAVE's governance forum, with the biggest change being to reduce WBTC's loan-to-value ratio (LTV) to zero.
However, given the large impact and value of assets locked on AAVE, the proposal does not recommend removing WBTC entirely. Instead, the lending platform will need to temporarily adjust lending parameters while monitoring progress in custody to make appropriate adjustments.
Parameter changes include:
- Reduced loan-to-value (LTV) to 0 for AAVE V3 versions on Ethereum, Arbitrum, Avalanche, Harmony, Optimism , and Polygon.
- Reduce current lending and borrowing ceilings to a range of 5-10% above the current Utilization threshold.
However, this proposal does not recommend reducing the Liquidation Level (LT) to avoid strong impacts on the current market structure. The adjustment of the LT threshold will be gradual and based on consultation and demand from relevant units.
It can be seen that the above moves from AAVE aim to minimize risks and limit the emergence of new loans from collateral assets such as WBTC. However, AAVE also does not want to completely remove this asset from the collateral list because the value of WBTC collateralized on versions and chains fluctuates approximately around 2.5 billion USD.
Previously, MakerDAO (now Sky) also implemented the removal of WBTC from the collateral list , due to concerns about switching the custody unit behind this asset.
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