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The Aave community discussed introducing a supply cap for the AAVE asset on Aave's v3 deployment on Optimism to reduce risk, with proposed caps ranging from 14,000 to 100,000 AAVE. The discussion concluded with the progression of an AIP to add a supply cap, emphasizing the importance of data-driven discussions when setting caps and defining risk parameters.
The discussion revolved around the proposal by Jmo to introduce a supply cap for the AAVE asset on Aave's v3 deployment on Optimism, aiming to reduce risk in the protocol1. The proposed cap was 100,000 AAVE, which was met with reservations by ChaosLabs, who suggested a lower cap of 14,000 AAVE based on current liquidity levels on Optimism2. This suggestion was driven by the identification of a market distortion caused by a single account supplying 87% of the total AAVE supply on Optimism, which could not be liquidated with the current liquidity levels, posing a risk to the protocol2.
The discussion led to a proposal by Fig for a modified Snapshot vote with options to adjust the supply cap to either 100,000 AAVE or 14,000 AAVE, or to abstain3. Jmo agreed to this proposal, expressing openness to a lower cap but acknowledging that a 14k cap could freeze market growth5. They also proposed setting caps for the community to decide if they want to bet on cross-chain liquidity, with plans to set conservative supply caps for all assets the following week5.
The discussion concluded with Pauljlei announcing the progression of an AIP to add a supply cap to the AAVE token on V3 Optimism to immediately reduce tail risk7. The community seemed to agree on the necessity of a cap, with PennBlockchain suggesting that the proposed 100k high cap was a good starting point, and further adjustments could be discussed with a "hedge" in place8. The discussion emphasized the importance of data-driven discussions when setting caps and defining risk parameters, with anticipation for further proposals and iterations on the assumptions and methodology6,7.
Posted a year ago
Last reply a year ago
Summary updated 2 months ago
Last updated 05/12 01:14