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Aave, a leading decentralized finance (DeFi) protocol, has frozen its Ethereum (ETH) borrowing as the leading smart contract platform gears up for a long-awaited merger.
Citing advice from analytics firm Block Analytica, the community proposal states that the Ethereum merger poses significant risks to the DeFi borrowing and lending market.
The proposal lists three main risks that the merger poses to the Aave ecosystem, mostly stemming from the excessive use of ETH. They include the possibility of liquidation becoming impossible, staked Ether (stETH) positions with negative annual yields, and the threat of ETH suppliers withdrawing all liquidity.
The risk of high utilization in the ETH market is caused by users who may profit from forked PoW ETH (ETHW) by borrowing ETH before merging. Transactions are hampered and the protocol is more likely to collapse.
In addition, high ETH borrowing rates make stETH/ETH recursive positions unprofitable, increasing the likelihood of users exiting positions and pushing stETH/ETH price deviations even further, leading to additional liquidations and bankruptcies. may occur. ”
Overwhelming 96.1% community members voted Since you answered yes to the offer, your ETH borrowing has been frozen.
According to the original forum post, Block Analytica is Rewarded 60 AAVE from the governance system for coming up with proposals.
If this proposal is adopted, a one-time payment of 60 AAVE will be transferred from Aave Governance to the MakerDAO Suspension Proxy. I am.
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Featured Image: Shutterstock/Space Creator/Natalia Siiatovskaya
