ARC: LTV and Liquidation Threshold Levels 2021-08-26

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Inkyamze proposed standardizing Value-at-Risk (VaR) across all Aave V2 assets with three risk tolerance levels, aiming to align risk tolerance with normalized expected yield. The proposal includes updated LTV and liquidation thresholds for various assets, and it was clarified that these changes won't expose existing positions to additional liquidation risk.

The discussion primarily revolved around the proposal by Inkyamze to standardize Value-at-Risk (VaR) across all assets in Aave V2 by introducing three distinct levels of risk tolerance. The aim is to align risk tolerance with a normalized expected yield, ensuring that no subset of assets adds disproportionate risk to the Safety Module. The proposal also included a detailed table of current and proposed LTV and Liquidation thresholds for various assets1.

Inkyamze also shared an analysis of recent liquidation data for xSUSHI and SNX, highlighting the different risk profiles of these assets. A Snapshot vote was announced to be posted on 2021-08-31 due to minimal feedback on Gauntlet’s ARC for Liquidation Bonus Updates, with an AIP creation targeted for 2021-09-071.

In response to queries from Pakim249, Inkyamze explained the methodology and definitions used, including how volatility and slippage are calculated. It was clarified that the simulation doesn’t take the EIP-1559 gas price dynamics into account. Further, Inkyamze provided details on conservative, moderate, and aggressive metrics, stating that their models suggest there is room for further updates across most Aave v2 assets 3,4.

Inkyamze also provided a list of various cryptocurrencies, their addresses, loan-to-value (LTV) ratios, and liquidation thresholds. The list included BAT, CRV, DAI, DPI, ENJ, KNC, LINK, MANA, MKR, REN, SNX, XSUSHI, TUSD, UNI, USDC, WBTC, WETH, YFI, and ZRX6.

In response to a query from Deep9, Inkyamze clarified that the proposed changes would not expose existing positions to additional liquidation risk as no liquidation thresholds are decreasing8.

The discussion concluded with Inkyamze announcing that Snapshot voting will start soon and encouraged greater participation as this will dictate the target risk levels for the next 90 days5.

Posted 2 years ago

Last reply 2 years ago

Summary updated 2 months ago

Last updated 09/12 13:53