In an effort to optimize protocol borrow usage and minimize losses from liquidations and bad debt, ChaosLabs has proposed a series of adjustments to risk parameters for three Aave V3 Avalanche assets: WAVAX, sAVAX, and LINK.e. The proposed changes, which include modifications to Loan-to-Value, Liquidation Threshold, and Liquidation Bonus, are based on comprehensive simulations conducted by Chaos Labs' Parameter Recommendation Platform.

The simulations indicate that these changes could potentially increase borrow by approximately $26K, while having a negligible impact on VaR and Extreme VaR. Specifically, the proposed changes include a decrease in the Liquidation Bonus for WAVAX from 10% to 9%, an increase in the Liquidation Threshold and Loan-to-Value for sAVAX from 30% to 40% and 20% to 30% respectively, and an increase in the Liquidation Threshold and Loan-to-Value for LINK.e from 68% to 71% and 53% to 56% respectively.

ChaosLabs has assured that there is ample on-chain liquidity to support any significant liquidations that may occur with the updated parameters. They have also confirmed that no outsized positions are currently influencing their recommendations. A Snapshot for community voting on these proposed changes will be published and is set to commence in 24 hours ^1,2. This proposal represents a proactive approach to risk management, aiming to enhance the overall stability and efficiency of the Aave V3 Avalanche assets.