Aave, a leading lending protocol, has introduced a new proposal through its Aave Risk Framework Committee (ARFC) aimed at adjusting the risk parameters associated with the DAI stablecoin.
The proposal, put forward by the Aave Chan Initiative (ACI) team, suggests adjusting DAI’s loan-to-value ratio (LTV) to 0% across all Aave deployments. Additionally, it recommends the removal of sDAI incentives from the Merit program, effective from Merit Round 2 onwards.
This proposal is a response to MakerDAO’s aggressive D3M plan, which has rapidly expanded the DAI credit line, potentially reaching 1 billion DAI soon from zero within a month.
By reducing potential risks while having minimal impact on users, the proposal aims to mitigate the dangers associated with stablecoin depegging when utilized as loan collateral on Aave. The recent hack involving Angle’s AgEUR serves as an example of risky minting practices on a smaller scale.
“Given that only a fraction of DAI deposits are currently utilized as collateral on Aave, and users have ample liquidity to switch to USDC or USDT as alternative collateral options, this proposal aims to mitigate potential risks without significantly negatively impacting our user base.”
Meanwhile, MakerDAO is gearing up to launch its “Endgame” transformation, aiming to scale the protocol’s decentralized stablecoin, DAI, to surpass $100 billion market capitalization. This transformation involves rebranding efforts and redenomination of Maker (MKR) tokens into NewGovTokens.
Eigenlayer recently surpassed Aave to become the second-largest DeFi protocol in terms of total value locked (TVL), highlighting the competitive landscape within the DeFi space. Despite this, Aave continues to maintain a significant user base, with over 5,700 daily active users, indicating its resilience and popularity within the ecosystem.
