Aave community backs pause on borrowing in Ethereum ahead of The Merge

The proposal to pause lending on Ethereum through the DeFi protocol Aave ahead of the major upgrade The Merge received поддержку almost 78% of votes.

The authors argued for a pause in lending citing the high risk of surges in activity. It is anticipated that users will borrow ether to profit from potential PoW forks on the second-largest cryptocurrency network.

I’m borrowing some $ETH on @AaveAave ahead of the Merge to get the ETH-PoW airdrop https://t.co/fgpOgPQFnx pic.twitter.com/pQ4xcnnk03

— Soldman Gachs ⌐◨-◨ (@DrSoldmanGachs) September 5, 2022

«High utilisation hinders liquidation operations, which increases the chances of protocol insolvency. In addition, the elevated ETH borrowing rate could render recursive stETH/ETH positions unprofitable. This will increase the likelihood that users will close positions and widen the stETH price deviation», — the explanation states.

According to Dune Analytics, there has been no noticeable growth in borrowing volume in the protocol over the past month.

The value of assets locked in Aave over the last 30 days has fallen by almost 10%, to $6.45 billion, according to DeFi Llama.

As of writing, stETH trades at roughly a 3.5% discount to Ethereum (CoinGecko). The platform’s token for liquid staking Lido Finance represents ETH locked in the PoS-network Beacon Chain. The price of the derivative asset has diverged from the ‘original’ in June. This occurred amid a roughly sevenfold decline in the largest ETH/stETH liquidity pool on Curve — to $620 million.

Earlier, Ethereum developers planned to migrate mainnet to the PoS algorithm around September 15.

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