Aave halts lending for 17 tokens

The DeFi protocol Aave temporarily froze lending markets for 17 tokens, citing asset-related risks.

The proposal received 100% support from the community. The vote closed on November 26.

The decision affected the following tokens:

• yearn.Finance (YFI);
• Curve DAO (CRV);
• 0x (ZRX);
• Decentraland (MANA);
• 1inch (1INCH);
• Basic Attention (BAT);
• Enjin (ENJ);
• sUSD (SUSD);
• Ampleforth (AMPL); 
• Gemini Dollar (GUSD);
• Rai Reflex Index (RAI);
• Pax Dollar (USDP);
• Liquity USD (LUSD);
• xSUSHI (XSUSHI);
• DeFi Pulse Index (DPI);
• renFIL — wrapped Filecoin (FIL) on Ren Protocol;
• Maker (MKR).

Users have lost the ability to deposit these assets to supply loans and borrow on the Aave V2 platform. The list includes tokens from some of the largest DeFi protocols such as MakerDAO or Curve.

The proposal to freeze lending markets for some assets was created on November 23. On that day, the Aave team reported that the protocol had bad debt of about $1.6 million due to the liquidation of a large CRV loan.

2/6 A large CRV borrow that had been building up for the last week was mostly cleared by the protocol liquidation process. However, the position was not covered entirely & 2.64M CRV (≈ $1.6M at current value) remains. This represents < 0.1% of the borrows on the protocol.

— Aave (@AaveAave) November 22, 2022

Developers noted that the Aave ecosystem provides mechanisms to smooth the consequences of such events. This includes the protocol’s security module, reserves and the DAO treasury. They also stressed that the debt amounted to less than 0.1% of total lending on the platform.

Nevertheless, the team said they hoped the community would begin discussing a response to the incident.

«Additionally, one community member using the alias MonetSupply opened a governance forum discussion on long-term asset risk across Aave V2 markets», — the developers added.

According to DeFi Llama, the protocol ranks in the top three by the value of assets locked in smart contracts, at $3.64 billion. Led by MakerDAO — $6.54 billion.

In September, the Aave community backed the suspension of borrowing on Ethereum ahead of The Merge upgrade.

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