Gauntlet - Synchronicity Price Adapter "Killswitch" Functionality for LST Emode

Reading time saved: 15 minutes

8 replies, 3016 views, 12 likes


The Synchronicity Price Adapter's proposed "Killswitch" functionality, aimed at improving price syncing and preventing insolvencies on Aave, sparked mixed reactions in the community due to potential market panic and exploitation by malicious actors. After community voting, Option 3, implementing Lever B (freezing LST + LTV → 0), was approved, concluding the discussion.

The discussion revolved around the proposal of a "Killswitch" functionality for the Synchronicity Price Adapter by Gauntlet, aimed at improving the CSPA 2.0 solution. The goal was to ensure synced price updates between LSTs and their BASE tokens, and to smooth out the natural variance in LST/BASE ratios due to the oracle implementation. The proposal included limiting LST borrowing power during severe dislocations to prevent insolvencies on Aave, and suggested IR curve changes to the BASE asset if LST liquidity dries up. A tiered approach to lower pool LT to liquidate the riskiest users if LST market price depegs was also proposed1.

The community had mixed reactions to the proposal. MarcZeller from the Aave-Chan Initiative expressed concerns about the proposed killswitch, arguing that it could trigger unnecessary market panic and create opportunities for malicious actors. However, they acknowledged that a "killswitch" to freeze markets and slow down processes might have benefits in extreme market scenarios2. CrypValue and ChaosLabs also expressed concerns about the potential for the killswitch to incite unnecessary market panic and benefit malicious actors4,7. Bgdlabs suggested that a kill switch should be more on the side of the proposed LTV0, freezing, and pause actions, combined with some type of Proof-of-Reserve5.

Gauntlet provided an update on the potential killswitch implementation, presenting several levers that can be activated in the event of a depeg. They recommended moving forward without a Proof of Reserve trigger, as it is still in development. The levers included dynamic, auto LT reduction (Lever A), freezing LST + LTV → 0 (Lever B), doubling BASE IR Curve Slope 1 (Lever C), and lowering LTV to non-emode parameters (Lever D)8.

A Snapshot was put up for community feedback and voting, with voting set to begin in 24 hours and last for 3 days9. After the voting, Gauntlet announced that Option 3, which implements Lever B, was approved. They thanked everyone who participated in the discussion and voting and promised to follow up on the next steps10. This concluded the discussion on the "Killswitch" functionality for the Synchronicity Price Adapter.

Posted 6 months ago

Last reply 4 months ago

Summary updated 2 months ago

Last updated 08/12 04:39