What is this about?

The community has been discussing whether to classify a recent security incident on April 11, 2023, as a shortfall event, which would activate the Aave safety module. The incident involved users experiencing losses due to assets being frozen or paused, leading to liquidations and high interest rates. The debate centered around whether compensation should be provided to affected users and if the incident met the criteria for a shortfall event according to Aave governance rules.

How is the community reacting?

The community reaction is mixed, with some members supporting compensation for those affected by high interest rates and others opposing the activation of the safety module. Concerns were raised about the fairness of compensation, the responsibility of users for their own losses, and the impact on different parties. The Aave Companies (ACI) stated that no user fund losses occurred and that the incident was successfully managed, hence they would vote against activating the safety module. The proposal was escalated to the TEMP CHECK Snapshot stage for voting.

Why this is positive?

• Neptune's proposal for compensating users with fees from the AAVE treasury could make the community whole and secure the ecosystem without triggering the safety module⁹.
• The ACI's successful management of the incident without user fund losses is seen as a testament to the effectiveness of the bug bounty program and the guardian role¹⁸.

Why this is negative?

• There is a perceived imbalance in the impact of the incident on liquidity providers and debtors, with some feeling that the latter were unfairly disadvantaged¹⁴.
• Concerns about the fairness of the AAVE governance voting system were raised, with some members feeling that it disproportionately favors token holders^44,46,52.
• The proposal to activate the safety module was overwhelmingly voted against, which could set a precedent that minor losses are not significant enough for safety module activation⁵³.

Next actions

The proposal has been voted on, with 95.79% voting against it, and as a result, the proposal is now archived⁵³. There are no further actions related to this proposal.