Aave

Summary

Given limitations in the current CSPA 2.0, Aave v3 faces insolvency risks in the scenario of severe price dislocations between LST market price and LST smart contract price. Gauntlet proposes a “killswitch” functionality for LST Emode in the face of an LST depeg. See the full forum post here.

Motivation

To further improve on CSPA 2.0, Gauntlet recommends that the Aave protocol limit LST borrowing power when abnormal dislocations occur. This can prevent bad agents from taking advantage of extreme market conditions to create insolvencies on Aave. We provide the options below as a “killswitch” functionality for LST Emode in the face of an LST depeg.

Specification

We provide 4 levers (A, B, C, D) that can be pulled in the event of a depeg. Please find more details on each lever in the forum post.

We provide the following set of options to the community.

	Market / Smart Contract depeg protection	Market / Smart Contract depeg protection	Liquidity decrease triggered protection	Liquidity decrease triggered protection
Option	Lever A - dynamic, automated LT reduction	Lever B - freeze LST + LTV -> 0	Lever C - double slope 1 of BASE	Lever D - lower LTV to non emode LST params
1 (Gauntlet choice)	x	x	x	x
2	x	x
3		x
4 (NAY - no killswitch)

This is a poll to gauge the community’s preference:

• Option 1: Lever A, B, C, D
• Option 2: Lever A, B
• Option 3: Lever B
• Option 4: Nay - no killswitch
• Abstain

Following community preference, we will work on the next steps in the implementation phase and will keep the community closely informed.

Disclaimer: Gauntlet reserves the right to not move forward with any parameter changes recommended in Snapshot polls, if market conditions change meaningfully.

By approving this proposal, you agree that any services provided by Gauntlet shall be governed by the terms of service available at gauntlet.network/tos.