The decentralized lending protocol AAVE has temporarily disabled its lending markets for multiple Ethereum-based tokens facing excess volatility and low liquidity.
The 17 frozen assets include various defi tokens that are competitors to AAVE, such as Compound (COMP) and Curve Finance (CRV).
- On Sunday, Aave passed a near-unanimous governance vote to disable the markets, with only two votes against, and over 500,000 in favor.
- In total, Aave’s frozen market list included the following: YFI, CRV, ZRX, MANA, 1inch, BAT, sUSD, ENJ, GUSD, AMPL, RAI, USDP, LUSD, xSUSHI, DPI, renFIL, and MKR.
- Among those, 5 are dollar-pegged stablecoins, including sUSD, Pax Dollar (USDP), Liquidity USD (LUSD), Gemini Dollar (GUSD) and RAI.
- The motion was proposed to mitigate risk “given that the market situation of these assets is currently volatile.”
- Earlier this month, Aave faced a $60 million short attack on its CRV pool using USDC as collateral.
- The attacker happened to be Avraham Eisenberg, the same person who exploited Mango Markets for $117 million in October, and who defended his actions as ethical in an uncensored interview.
- Eisenberg ultimately failed in this attempt and lost $10 million in the process. Nevertheless, the financial modeling platform Gauntlet called for freezing certain Aave markets in the aftermath as a precaution.
“The Aave ecosystem was built with a number of mechanisms that the Aave community can deploy to cover events like this, including the Safety Module, the Ecosystem Reserve & the DAO Treasury,” explained Aave in a Twitter thread last Tuesday.
- Aave added that the attack against the protocol provided a level of transparency that is rare within centralized entities in crypto. On Monday, BlockFi officially filed for bankruptcy after freezing withdrawals due to FTX exposure.