On October 30, risk service provider LlamaRisk executed lower borrowing ceilings and temporary interest-rate changes on Aave V3 and V4, a day after an emergency freeze on the platform. Its plan keeps several tokens, including USDT and USDC, at zero collateral borrowing power for new loans.
LlamaRisk announced in an October 30 update that it had implemented lower borrowing ceilings and temporary interest rate changes across Aave V3 and V4. The measures follow an emergency freeze on October 29, after LlamaRisk's initial assessment described the exploiter's Aave position as overcollateralized and subject to normal liquidation.
The new caps preserve room above earlier borrowing levels while cutting unused capacity. LlamaRisk based the ceilings on the larger of borrowing before the exploit or at observation time, plus roughly 2%, with asset-specific rounding. At 00:26 UTC on Oct. 30, several other reserves were displayed at 100% utilization.
On the rate side, LlamaRisk reduced the second slope of the borrowing curve, which governs interest above the optimal utilization point, while leaving the base rate and first slope unchanged. This can ease pressure on borrowers at higher utilization without changing modeled rates at or below that point.
For new borrowing, LlamaRisk’s plan keeps USDT, USDC, USDT0, POL, WAVAX, sAVAX, XAUt, PAXG and OP, including wrapped and bridged versions, at zero collateral borrowing power on V4 and zero loan-to-value on V3. These tokens can otherwise be supplied, withdrawn, borrowed and repaid once the relevant market restrictions are removed, subject to liquidity and normal account constraints. On V4, a new borrow, collateral withdrawal or collateral toggle moves an existing position onto the zero-factor configuration.
GHO borrow-cap cuts on the Core and Prime markets remain queued. Aave access depends on restored borrowing caps, lower rates, collateral eligibility and available pool liquidity.
Analysis
Why This Matters
- Aave is one of the largest DeFi lending protocols; its response to a potential exploit sets a precedent for crisis management across the sector.
- The borrowing caps and collateral restrictions directly affect user liquidity and may drive borrowers toward competing platforms.
- This incident highlights the tension between decentralized trust and the need for rapid, centralized-style intervention to protect funds.
Background
Aave is a decentralized lending protocol that allows users to deposit and borrow crypto assets permissionlessly. On October 29, it froze certain lending markets after LlamaRisk detected unusual activity that it assessed as a potential exploit. LlamaRisk, a risk management provider, was tasked with designing a controlled reopening.
What to Watch
- Whether the new caps remain in place or are adjusted as market conditions change.
- The implementation of the queued GHO cap cuts, which would further restrict borrowing on those assets.
- Potential reactions from users and token holders, including possible liquidity shifts to other protocols.
Checked
12 claims in this story checked against 1 source: 11 supported.
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- SupportedAave cut borrowing caps and set V4 collateral limits after the emergency freeze.CryptoSlate: “LlamaRisk’s rollback plan describes four waves, with only the V4 collateral-configuration wave explicitly marked as already executed in the 13:49 UTC update.”
- SupportedLlamaRisk’s plan sets several tokens to zero collateral borrowing power.CryptoSlate: “For new borrowing, the plan keeps USDT, USDC, USDT0, POL, WAVAX, sAVAX, XAUt, PAXG and OP, including wrapped and bridged versions, at zero collateral borrowing power.”
- SupportedOn October 30, LlamaRisk executed lower borrowing ceilings and temporary interest-rate changes on Aave V3 and V4.CryptoSlate: “In an Oct. 30 update , risk service provider LlamaRisk said it had executed lower borrowing ceilings and temporary interest-rate changes on Aave V3 and V4.”
- SupportedThe measures followed an emergency freeze on October 29.CryptoSlate: “The measures follow an Oct. 29 emergency freeze, after LlamaRisk’s initial assessment described the exploiter’s Aave position as overcollateralized and subject to normal liquidation.”
- SupportedLlamaRisk’s initial assessment described the exploiter’s Aave position as overcollateralized and subject to normal liquidation.CryptoSlate: “LlamaRisk’s initial assessment described the exploiter’s Aave position as overcollateralized and subject to normal liquidation.”
- SupportedThe caps were based on the larger of borrowing before the exploit or at observation time, plus roughly 2%, with asset-specific rounding.CryptoSlate: “LlamaRisk’s cap methodology starts with the larger of borrowing before the exploit and borrowing at its observation time, then adds roughly 2%, with asset-specific rounded ceilings.”
- SupportedAt 00:26 UTC on October 30, several other reserves were displayed at 100% utilization.CryptoSlate: “At 00:26 UTC on Oct. 30, LlamaRisk put Core USDC utilization at 97.8%, with several other reserves displayed at 100%.”
- Partly supportedLlamaRisk reduced the second slope while leaving the base rate and first slope unchanged.CryptoSlate: “LlamaRisk also reported executing temporary Slope2 reductions. The recommendation lowers the steep part of Aave’s borrowing-rate curve above its optimal utilization point. The proposed base rate, first slope, and optimal point stay unchanged”
- SupportedThe lower second slope can ease pressure on borrowers at higher utilization without changing modeled rates at or below the optimal point.CryptoSlate: “A higher rate cannot attract fresh deposits into a reserve that rejects supply, while lower interest growth can ease pressure on borrowers without repaying their principal or supplying the cash needed for withdrawals.”
- SupportedThe listed tokens, including wrapped and bridged versions, are set to zero collateral borrowing power on V4 and zero loan-to-value on V3.CryptoSlate: “On V3, the zero loan-to-value setting also applies in E-Mode, while the equivalent restriction is a zero collateral factor on V4.”
- SupportedOnce relevant market restrictions are removed, the tokens can otherwise be supplied, withdrawn, borrowed and repaid, subject to liquidity and normal account constraints.CryptoSlate: “Under the terms LlamaRisk describes, the same tokens can otherwise be supplied, withdrawn, borrowed and repaid once the relevant market restrictions are removed, subject to liquidity and normal account constraints.”
- SupportedGHO borrow-cap cuts on the Core and Prime markets remain queued.CryptoSlate: “GHO borrow-cap cuts on the Core and Prime markets remained queued.”
