Pause ETH Borrowing

Simple Summary

A proposal to pause ETH borrowing in the period leading up to the Ethereum Merge.

In addition, this AIP also transfers a one-time payment of 60 AAVE from the Aave treasury to the MakerDAO pause proxy in connection to the proposal.

Abstract

Ahead of the Ethereum Merge, the Aave protocol faces the risk of high utilization in the ETH market. Temporarily pausing ETH borrowing will mitigate this risk of high utilization.

Motivation

Full details are provided in the original forum post.

The risk of high utilization in the ETH market is driven by users potentially benefiting from the forked PoW ETH (ETHW) by borrowing ETH before the merge. High utilization interferes with liquidation transactions, thus increasing the chances of insolvency for the protocol. In addition, a high ETH borrow rate can make stETH/ETH recursive positions unprofitable, increasing the chances that users unwind their positions and drive the stETH/ETH price deviation further, causing additional liquidations and insolvency.

Specification

• Calling disableBorrowingOnReserve to disable ETH borrowing.
• Sending 60 AAVE to the MakerDAO pause proxy located at 0xBE8E3e3618f7474F8cB1d074A26afFef007E98FB from the ecosystem reserve.

Copyright

Copyright and related rights waived via CC0.

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