The Aave community will vote on a proposal to suspend Ethereum (ETH) loans until the merge begins. According to DeFi platform Aave, the controversial hard fork proposal raises concerns about the protocol’s high usage risks in the ETH market.
Aave community prepares for critical vote
The “Temporarily Pause ETH Borrowing” proposal proposes to stop Ethereum borrowing on Aave until the merger begins. The offer was made public today by DeFi lending and borrowing protocol Aave. The plan is ready for a vote starting today, August 30, 2022 and lasting until September 2.
Why is Aave worried?
Due to the ETH hard fork, Aave believes the protocol is in danger of seeing significant use in the ETH market. Therefore, stopping the protocol from borrowing ETH would better mitigate risk. Users can take advantage of the forked Ethereum PoW token (ETHW) by buying ETH before the merge. As a result, there is a chance that ETH will gain more attention and demand before the merge. High usage will have an impact on liquidation agreements and increase Aave’s risk of bankruptcy.
Also, stETH/ETH borrowing positions on Aave may be affected by a significant ETH borrowing. Recursive borrowing involves DeFi investors staking their ETH to get stETH. It then borrows more ETH by depositing it as collateral on a lending protocol like Aave. Additionally more stETH and others can be borrowed. Currently, $907 million worth of stETH is used as collateral for ETH borrowing on Aave.
Users may break their bets as a result, further distorting the stETH/ETH constant. As a result, there are more possibilities of liquidation and bankruptcy in the cryptocurrency market. Instant voting also suggests MakerDAO a lump sum of 60 AAVE from the Aave treasury. Regarding the plan, it helps prevent surrogate.
The Aave community has four alternatives for snapshot voting;
- Temporary suspension of ETH borrowing and payment of 60 AAVE tokens
- Temporarily pausing ETH borrowing but deciding to pay in a different offer, not pausing ETH borrowing, and avoiding a vote.
Community only supports new Ethereum
After Merge, Aave DAO decided to support Ethereum PoS and prevent any Ethereum fork like ETHPoW. According to co-founder Vitalik Buterin and the Ethereum core team, Ethereum Merge is expected to take place on September 15. After Merge, ETH price will become deflationary.
Latest developments from Ethereum merge
On August 24, Go Ethereum released a fix for the bug update Geth v1.10.22 (Promavess). Ethereum client Go Ethereum has released Geth v1.10.23 (Sentry Omega), a stable Mainnet Merge update.
Anyone updating to Geth v1.10.22 should undo the chain and re-run the last 2 days. After that, mainnet node operators need to be upgraded with Geth v1.10.23 (Sentry Omega). Also, an alternative is to delete the “chaindata” folder and resync it after an update.
If you’ve already done the 22nd update, you’ll need to undo your chain and run the last 2 days again to make sure everything is OK. More in the node notes. I am sorry for this!
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