Aave

Simple Summary

Gauntlet’s risk simulation platform has identified an opportunity to modify risk parameters, including Loan To Value, Liquidation Threshold, and Liquidation Bonus across 6 assets on Ethereum v3, Arbitrum v3 and Ethereum v2. For more details, see the full forum post here.

Motivation

These parameter updates are a continuation of Gauntlet’s regular parameter recommendations and they seek to maintain the overall risk tolerance of the protocol while making risk trade-offs between specific assets.

Gauntlet’s parameter recommendations are driven by an optimization function that balances 3 core metrics: insolvencies, liquidations, and borrow usage. Parameter recommendations seek to optimize for this objective function. Our agent-based simulations use a wide array of varied input data that changes on a daily basis (including but not limited to asset volatility, asset correlation, asset collateral usage, DEX / CEX liquidity, trading volume, the expected market impact of trades, and liquidator behavior). Gauntlet’s simulations tease complex relationships between these inputs that cannot be simply expressed as heuristics. As such, the input metrics shown in the full forum post can help understand why some parameter recommendations have been made but should not be taken as the only reason for the recommendation. The individual collateral pages on the Gauntlet Risk Dashboard cover other key statistics and outputs from our simulations that can help with understanding interesting inputs and results related to our simulations. For more details, please see Gauntlet’s Parameter Recommendation Methodology and Gauntlet’s Model Methodology.

Specification

Gauntlet’s simulation engine will continue to adjust risk parameters to maintain protocol market risk at reasonable levels while optimizing for capital efficiency. Our simulations show that we can improve the balance of risk and capital efficiency by making the parameter changes specified below.

Ethereum Aave v3 Parameter Changes Specification

Parameter	Current Value	Recommended Value
DAI Loan to Value	67%	77%
USDC Liquidation Threshold	79%	80%
WSTETH Liquidation Bonus	7%	6%

Arbitrum Aave v3 Parameter Changes Specification

Parameter	Current Value	Recommended Value
LINK Liquidation Threshold	75%	77.5%

Ethereum Aave v2 Parameter Changes Specification

Parameter	Current Value	Recommended Value
CRV Loan to Value	52%	0%
SNX Liquidation Threshold	62%	59%

Gauntlet continues to recommend setting the CRV LTV to 0, despite the AIP failing to pass.

Lowering SNX LT by 3% will liquidate 0x8ae928cb080aa43a50393cd08de208ef2b1bb86a, who currently has HF 1.00 and supplies $50 SNX, $1300 USDC to borrow TUSD, BAT, and ZRX.

Risk Dashboard

The community should use Gauntlet’s Risk Dashboard to understand better the updated parameter suggestions and general market risk.

Value at Risk represents the 95th percentile insolvency value that occurs from simulations we run over a range of volatilities to approximate a tail event.

Liquidations at Risk represents the 95th percentile liquidation volume that occurs from simulations we run over a range of volatilities to approximate a tail event.

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.