Adding staked AAVE as collateral?

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The Aave community discussed the potential of using staked AAVE (stkAAVE) as collateral, despite technical risks, with the upcoming V2 possibly allowing a separate market for stkAAVE. Suggestions included running simulations, partnering with CURVE for a stkAAVE pool, and allowing only 70% of xAAVE value as collateral, with the remaining as a loss backstop.

The discussion primarily focused on the potential of incorporating staked AAVE (stkAAVE) as collateral. The idea was initially proposed by Piterpetito, who was interested in the dual functionality of staking AAVE tokens and using them as collateral. Emilio responded with a note of caution, pointing out the technical risk involved since stkAAVE is already used as collateral to protect the Aave protocol from shortfall events. However, he also mentioned the upcoming V2 could potentially allow for the creation of a separate market for stkAAVE not covered by the Safety Module.

The community members, including SLaAve and Piterpetito, agreed that this feature could incentivize more users to stake in the protocol, potentially increasing the value of AAVE and the security of the platform. Dux suggested running simulations to understand the impact of this feature on the shortfall protection AAVE provides to the protocol. Shane proposed that this feature could attract more stakers and increase the value of AAVE, even if it reduces the APY of stkAAVE. He also suggested a partnership with CURVE to establish a stkAAVE pool for extra APY and CRV bonus.

Reeser proposed a solution to accommodate this feature by only allowing 70% of the xAAVE value to be used as collateral, leaving the remaining 30% as a loss backstop. He also suggested adding staked AAVE to the Liquidity mining incentives. The discussion ended without a final conclusion, but with KriptoHayat and Alan expressing interest in the progress of the topic. The community awaits further developments and discussions on this innovative proposal.

Posted 3 years ago

Last reply 2 years ago

Summary updated 2 months ago

Last updated 03/12 14:23