Aave community proposes to temporarily suspend ETH lending before the Merge

2022.08.31 01:46

Aave community proposes to temporarily suspend ETH lending before the Merge

With the Ethereum Merge on the way, the risk research and analysis team Block Analitica proposed a temporary pause in Ether (ETH) borrowing to mitigate the risks which may lead to a decentralized finance (DeFi) implosion in the Aave lending protocol during the Merge.

The team pointed out the potential issue of high ETH utilization which may result in liquidations being hard or impossible and annual percentage yields (APYs) reaching negative figures. Furthermore, the uncertainties surrounding the Merge and a potential Ethereum proof-of-work (PoW) fork may cause liquidity providers to start a bank run, pushing utilization to even higher levels.

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