Aave Community Proposes to Mitigate Risks with Curve DAO Token

Aave's Strategic Move to Reduce Risk

The Aave community is proactively addressing its protocol's exposure to the Curve DAO token, CRV, through two significant proposals currently open for voting. This initiative aims to mitigate risks linked to the substantial borrowing position of Curve Finance's founder, Michael Egorov, within the Aave protocol.

Understanding the Curve DAO Token

Curve DAO token, or CRV, serves as the native token for the decentralized finance platform, Curve Finance. Egorov has deposited over 30% of CRV's total market capitalization as collateral, securing nearly $60 million in loans on Aave v2. However, recent events have introduced potential challenges.

Implications of the Curve Hack

A critical factor influencing these proposals is the recent security breach on Curve, which occurred on July 30. This incident negatively impacted the token's price, subsequently increasing the risk of liquidation for Egorov's significant borrowing position. The price volatility of CRV heightens the urgency for Aave to take precautionary measures.

Proposals to Enhance Protocol Stability

To address these concerns, one of the proposals involves reducing the liquidation threshold for CRV on Aave v2 on Ethereum. By doing so, Aave aims to safeguard its protocol from potential market fluctuations and ensure the continued stability and reliability of its lending platform.

Conclusion

Aave's proactive approach in managing its exposure to CRV highlights its commitment to maintaining a secure and stable lending environment. These strategic proposals represent a key step in mitigating risks and protecting the interests of the Aave community.