LlamaRisk Proposes Aave V3 Core Shift for $1.33 Billion in Collateral

LlamaRisk has proposed narrowing Aave V3 Core to established, liquid collateral, a plan covering about $1.33 billion in collateral and $1.03 billion in debt as of Nov. 9.

The snapshot includes rsETH, osETH, LBTC, tBTC and rETH, along with several reserves with smaller exposures. LlamaRisk, a risk service provider, proposes keeping Core focused on assets with established liquidity while allowing migration options for other positions.

The initial step would freeze the selected reserves, halt new supply and set their loan-to-value (LTV) ratios to zero. Existing positions would remain open. For reserves that are already frozen but still allow borrowing, the proposal recommends raising the reserve factor to 99% when outstanding debt exceeds $20,000.

tBTC is already frozen on Aave V3 Core. Its reserve-factor schedule lists 99% as recommended, up from 50% currently.

The proposal contemplates an orderly migration of affected positions to Aave V4.

If migration is not completed within several months, the proposal outlines further steps. Those steps include staged liquidation-threshold reductions and interest-rate adjustments.

The proposal calls for migration discussions with issuers and large borrowers.