LlamaRisk Proposes Narrowing Aave V3 Core Collateral Scope, Affecting $1.33 Billion in Assets
LlamaRisk has proposed limiting Aave V3 Core to established, more liquid collateral and freezing reserve pools for several assets. According to Foresight News, the proposal would have Aave V4 support a broader range of assets through risk premiums and isolation mechanisms. The assets slated for freezing include rsETH, osETH, LBTC, tBTC, and rETH. As of November 9, the proposal covers about $1.33 billion in collateral and approximately $1.03 billion in debt.If the reserves are frozen, users would be unable to make new deposits of the affected assets, and their loan-to-value ratios would be set to zero, preventing them from using the assets as collateral for new borrowing. Existing positions could remain open, be repaid, or be migrated. LlamaRisk plans to coordinate with asset issuers and major borrowers to move positions to collateral retained on V3 Core or to Aave V4. If exposure does not decline, the proposal says liquidation thresholds could be reduced gradually, depending on the assets, with borrowing rates potentially increased as a last resort.