Aave has temporarily banned loan markets for 17 Ethereum-based tokens and stablecoins.
Decentralized lending procedure Aave has temporarily suspended lending markets for 17 tokens in an attempt to prevent future market manipulation assaults from exposing it to bad debt.
Aave is the biggest Ethereum-based lending mechanism, with over $3.65 billion in locked assets across numerous chains. Its decision to temporarily cease the lending of numerous tokens on Aave version 2.0 was made after governance members supported a motion from Gauntlet Networks requesting to pause “volatile” assets with poor liquidity profiles on Aave.
yearn.finance, Curve DAO, 0x, Decentraland, 1inch, Basic Attention Token, Ampleforth, DeFi Pulse Index, renFIL and Maker, Enjin, xSUSHI, and five stablecoins including sUSD, GUSD, RAI, USDP, and LUSD are the lending markets.
Due to risk management, the protocol will prohibit users from depositing these assets or obtaining loans with them on the site.
The idea was approved days after a trader established an enormous short position on the Curve DAO (CRV) market on Aave, resulting in $1.6 million in bad debt for the protocol.
Last week, a trader borrowed 92 million CRV ($57 million) on Aave and then constantly sold the tokens, resulting in a precipitous decline in the CRV price. However, the trader saw a price squeeze as the CRV token price rose. Aave incurred a $1.6 million bad debt when closing down the short position.
Although Aave indicated that it has adequate finances to cover the bad debt, the initiative wishes to avoid such occurrences by freezing pools of low-liquidity assets.
Also Read: Bitcoin Value Follows Declines In Asia’s Equities Markets
Wallets