Aave Collateral Usage Cap

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SamUchiha has proposed new risk management parameters for Aave V3, including a 24-hour and maximum collateral usage cap, to mitigate potential damage from various attacks and hacks. The proposal, still in its initial stages, also suggests making more stable coins available as collateral, setting dynamic cap amounts, and developing an address-based credit score oracle for frequent small amount users.

In an effort to bolster the security of Aave V3, SamUchiha has proposed the implementation of new risk management parameters. These include a 24-hour and maximum collateral usage cap, designed to mitigate potential damage from various types of attacks and hacks1. The proposal aims to protect against collateral crash, collateral dumping, collateral price manipulation, infinite minting, Aave smart contract breaches, and Aave v3 portal attacks1.

The proposed collateral usage cap would limit the amount of collateral that can be used to borrow other assets within a 24-hour period. If the cap is reached, new borrowers would have to wait until other borrowers return the borrowed amount. The proposed maximum amounts for different assets are: ETH with no limit, USDC at $500 million, and AAVE at $100 million. These figures are preliminary and subject to further refinement1.

SamUchiha also suggested potential implementations, such as testing and setting efficient cap amounts for different pools. They believe it wouldn't be hard to implement and suggest implementing it to V2 and V3. Future improvements could include setting a dynamic cap amount that changes via TVL, fund returning amount, setting an automated cap changing function based on the number of addresses and market size of the pool, and setting a credit score based limit illumination function for small amount users1.

In addition, SamUchiha proposed making more stable coins available to use as collateral, with a small amount of collateral usage cap set for each stable coin. They acknowledged that the collateral usage cap could limit Aave, but believes it would be beneficial in protecting Aave from various risks. They don't see the collateral usage cap as a long-term solution, but as a necessary measure for Aave's current safety. They are considering working on an address-based credit score oracle to eliminate the 24-hour collateral usage cap for frequent small amount Aave users1.

This proposal is in its initial stages, and SamUchiha has expressed a willingness to conduct deeper research, testing, and finding the most efficient cap amount based on TVL and historic collateral usage data if the Aave community supports it2. This discussion represents a proactive approach to risk management within the Aave community, with the ultimate goal of ensuring the platform's security and stability.

Posted 2 years ago

Last reply 2 years ago

Summary updated 2 months ago

Last updated 09/12 13:53