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Welcome to _ Barry!
Very excited to announce that I’ve joined the @bgdlabs team!View quoted post on X
I will be making a personal donation of 100 ETH to the relief effort coordinated by @aave Labs in relation to the KelpDAO's/LZ exploit.
While I'm not involved with Aave anymore, I still believe the Aave protocol is important for DeFi overall. And the coordination effort led by @aave Labs without Aave itself being the exploited system, deserves support
While I'm not involved with Aave anymore, I still believe the Aave protocol is important for DeFi overall. And the coordination effort led by @aave Labs without Aave itself being the exploited system, deserves support
Imo:
- Suppliers agree are relatively insensitive to rates at the moment, and they **very** sensitive to specific announcements/plans regarding the unpaired collateral not affecting stablecoins on Aave Core (I really think it is the case, but uncertainty is not good for suppliers).
- Stablecoin borrowers are actually quite a priority, because they are the business. Meaning that they are already suffering the high rates, but on the current ~15% levels, for the argument of duration/float, @ImperiumPaper comments, I think it is a scenario they should be prepared to, because it really can happen for 3-5 days, even if rarely sporadically.
- The current borrowing rate levels, I'd say, are in quite good "equilibrium" considering the previous. I'd say even quantitatively, the delta LTV-LT of Aave v3 (~2% on more stressed e-modes like Ethena) should have protected a majority of borrowers. Of course, not against the ongoing cost, but still, the cost is not an order of magnitude higher. In the case of borrowers of stables against "volatile" assets, the borrowers assume want frequently) the volatility on the collateral, going long. So the higher borrowing cost on the collateral for a short period of time is not really.
- I'm currently an outsider to Aave, but 100% sure @aave Labs are working full-steam to achieve a situation where 100% the stablecoins are not getting affected, and I'd bet neither ETH in any big amount (or zero).
- Suppliers agree are relatively insensitive to rates at the moment, and they **very** sensitive to specific announcements/plans regarding the unpaired collateral not affecting stablecoins on Aave Core (I really think it is the case, but uncertainty is not good for suppliers).
- Stablecoin borrowers are actually quite a priority, because they are the business. Meaning that they are already suffering the high rates, but on the current ~15% levels, for the argument of duration/float, @ImperiumPaper comments, I think it is a scenario they should be prepared to, because it really can happen for 3-5 days, even if rarely sporadically.
- The current borrowing rate levels, I'd say, are in quite good "equilibrium" considering the previous. I'd say even quantitatively, the delta LTV-LT of Aave v3 (~2% on more stressed e-modes like Ethena) should have protected a majority of borrowers. Of course, not against the ongoing cost, but still, the cost is not an order of magnitude higher. In the case of borrowers of stables against "volatile" assets, the borrowers assume want frequently) the volatility on the collateral, going long. So the higher borrowing cost on the collateral for a short period of time is not really.
- I'm currently an outsider to Aave, but 100% sure @aave Labs are working full-steam to achieve a situation where 100% the stablecoins are not getting affected, and I'd bet neither ETH in any big amount (or zero).
Lots of people are dunking on the Circle proposal to shift Aave rates, and I have, inevitably, been asked my opinion. I’ll share it here publicly.View quoted post on X
Gordon’s proposal is not incorrect directionally. He correctly diagnoses that the market is not clearing, and provides a pretty standard solution that would fit into half the textbooks on my bookshelf.
Where I disagree with him are on his rate (in)sensitivity assumptions. Going straight to 40% seems destined to force liquidations. In the current market, contagion risk is already high, so cascades would need to be mitigated.
I don’t know if Aave can throttle the liquidation throughput like the old Maker vaults could, but that would be a way to do that. It’s an open question whether this would be a good idea. I’m open to considering it, but am not convinced at this time.
Gordon doesn’t say that the goal is repayment or liquidation, though. He believes this is a way to finance attracting supply, which I agree WOULD be the best way to unstick the market for the moment.
However, the rate can’t just be the usual mechanics. For starters, anyone who has been in DeFi knows that juicy rates get diluted quickly in a floating rate lending protocol. Given the high probability of at least some loss, why would a lender put their stables to work even for a temporary (maybe a week?) 40% rate?
Imagine you had $100m, and you saw this 40% deposit rate on Aave. Knowing there is more than $1b of impaired collateral in the system, are you going to risk your clients’ money for $109k/day? You’d need a week and a half just to break even on a 1% loss to your deposited funds.
Except this is a floating rate. Once danger has passed, the rates drop down. And if they stay elevated it’s likely because the situation hasn’t gotten better. The calculus COULD be different if it was 40% for 6 months or a year. But you’re really just getting outsized rates for a few days in the best case scenario, and it is rising or realized risk that would let you keep earning that rate.
This is at its heart a risk that is unmeasured, and so you can’t know what is the correct rate to price it at. You can’t tell if this is picking up nickels in front of a steam roller or the trade of the century.
So I think depositors are the most rate insensitive group at the moment, and due to a very wide range of possible outcomes at the intersection of distressed collateral assets, ultimate recovery rates on those assets, timeline to realize that recovery, secondary damage that has created bad debt, and governance risk around things like implementation of Umbrella or the funds seized by Arbitrum.
Basically everyone is standing around keeping rsETH marked to some imaginary number because we don’t have enough guidance from Kelp (and possibly L0 and now Arbitrum) for Aave to know how to begin liquidations and realize losses without accidentally taking on someone else’s loss because they were too pessimistic in valuing the impaired collateral.
I do think at this point, Aave would be better off making an “ok” plan and acting today than waiting for a “good” plan that requires information from Kelp/L0/Arbitrum/law enforcement that may not be available for some time.
A person I trust commented that sometimes it is important not to ignore weird propaganda, no matter how silly it seems. So, just a thought, which is highly possibly my last on the topic.
Maintenance & incremental updates are not (only) what BGD was doing for 4 years in Aave. However, those tasks were very fulfilling work, way more important than people think, and for anybody looking around, a big reason of success in mature products. To be a bit more blunt: the cemetery is full of good initial ideas not well taken care of after.
I would argue that indirectly trying to diminish that role precisely now on Aave, is very very far from a good idea.
Maintenance & incremental updates are not (only) what BGD was doing for 4 years in Aave. However, those tasks were very fulfilling work, way more important than people think, and for anybody looking around, a big reason of success in mature products. To be a bit more blunt: the cemetery is full of good initial ideas not well taken care of after.
I would argue that indirectly trying to diminish that role precisely now on Aave, is very very far from a good idea.
I am seeing this myth being spread around that the core development team of Aave left. This is indeed false. While Aave labs built V3 up to the 3.0.1 and bgd took over the progressive updates till 3.6, Labs has been independently security reviewing every single V3 iteration that was released, sometimes providing feedback to bgd or finding bugs. While the code was developed by bgd, Labs team still has excellent proficiency with it. The team lead @miguelmtzinf has been developing Aave as a core contributor since Aave V2 and his knowledge is second to none. Additionally, V3 is at the end of its development cycle and requires basically no upgrades, so the only focus will be threat monitoring, which again we have always been doing. All new features and protocol extensions that are planned will be built on Aave V4 because the V4 infrastructure enables them. BGD has no contributions to V4, therefore the development is in pretty strong shape.View quoted post on X
