An archive of our post on Aave Governance forum, in the context of our scope of Risk service provider.

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This is an archive of our post on Aave governance forum. Read the full thread here.

#LlamaRisk - Monthly Community Update

#December 2024

#Overview

LlamaRisk presents our December 2024 monthly update, summarizing key activities and outlining upcoming priorities.

#Highlights

#Recommendations and inputs

#Asset onboarding

• [ARFC] Add rlUSD to Core Instance - Supporting with note pending updates on custodial disclosures and attestations.

#New Chain

• [ARFC] Aave V3 Deployment on the Spiderchain (Botanix Labs) - Supporting based on decentralized Federation plans and upcoming audits.

#GHO related

Reviewed GHO initiatives by @TokenLogic, @ChaosLabs,
@bgdlabs, and @karpatkey_TokenLogic, supporting efforts to
further GHO liquidity and adoption:

• [ARFC] TokenLogic GHO Stewards - GHO Borrow Rate Update

• [ARFC] Increase Bucket Capacity of GHO FlashMinter on Ethereum

• [ARFC] BGD. GhoDirectMinter

• [ARFC] Aave Liquidity Committee Funding Phase V

#E-modes

• [ARFC] Proposal to Remove USDS from sUSDe Liquid E-Mode in Aave Prime Instance - Supporting with alignment to previous risk considerations (LB from 3% → 4%).

• [ARFC] Enable eBTC/WBTC liquid E-Mode on Aave v3 Core Instance - Supporting with noted concerns on collateral exposure and oracle considerations.

• [ARFC] Enable LBTC/WBTC liquid E-Mode on Aave v3 Core Instance - Supporting while highlighting CubeSigner security concerns and liquidity concentration.

#Misc.

• [ARFC] Aave v3 Gnosis Instance Updates - Highlighted liquidity risks for osGNO and GNO, and opposed sDAI borrowing due to market and operational risks.

• [ARFC] Adjust Risk Parameters for Aave V2 and V3 on Polygon - Recommended no immediate changes due to unchanged risk profile, with emphasis on gradual exposure reduction if needed.

• [ARFC] USDS Interest Rate Curve Update

• [ARFC] weETH Risk Parameter Adjustment - Supporting with consideration of low risk, backed by ChaosLabs analysis and the high liquidity of weETH.

• [ARFC] Interest Rate Parameter Adjustments on Prime Instance - Supporting with concerns about amplified volatility from wETH-Stable Prime e-Mode, suggesting restrictions on stablecoin usage.

• [ARFC] Prime & Core Instance - wstETH Reserve Update - Supporting with noted concern about increased bad debt risk if wstETH borrowing use case shifts.

• [ARFC] Reduction of Reserve Factor and Slope2 for Stablecoin Markets on Aave V2

• [ARFC] Increase Borrow Slope1 to all Stablecoins across all Aave Instances - Supporting borrow rate stabilization with noted growth-focused risks.

#Research and analysis

• [ARFC] Temporary halt further sUSDe cap increase and raise the liquidation penalty - The proposal aimed to halt sUSDe cap increase and raise the liquidation penalty to 4% to address reserve fund concerns. The Ethena team deposited $10M to the reserve fund, addressing the capitalization concerns, eliminating the need for further adjustments.

• Ethena Reserve Fund Drawdown Methodology V2 - Refined reserve fund methodology for Ethena, which is critical for maintaining USDe’s solvency with Aave’s sUSDe liquid e-Mode.

• Coinbase’s MiCA-Driven Stablecoin Restrictions: Aave’s Strategic Opening in Europe - Highlighted opportunities for Aave DAO to attract users seeking decentralized alternatives.

• MPCs in Protocol Treasury and Operational Context - Comprehensive analysis of MPC wallets in DeFi, examining their advantages over multisigs, evaluation frameworks, and security best practices for protocol treasury management.

#Community Engagement

• Continued outreach to Service Providers and Delegates to gather feedback and improve coordination across the ecosystem.

#Upcoming Focus Areas

We posted a 2024 yearly recap here, where we highlight our plans for the year. Our engagement and service to Aave DAO remain front and center.

We will continue focusing on key initiatives and delivering outstanding value for the DAO, with efforts to collaborate with other SPs, such as @ChaosLabs. An example of this is a joint proposal that will be submitted shortly to facilitate further growth of USDe within Aave while mitigating key risks.

We welcome community feedback and suggestions. Please share any questions, ideas, or areas where you would like increased focus from the LlamaRisk team.