This is an archive of our post on Aave governance forum. Read the full thread here.

LlamaRisk supports these changes.

We’ve already expressed our favorable view regarding the adjustments to the reserve factor and Slope2 settings on the Aave V2 Ethereum stables (USDC/USDT/DAI). In our view, moving forward by disabling new borrows on all assets is the next logical step to accelerate the deprecation of V2. The proposed minimum base rate of 20% coupled with a Slope2 of 300% creates strong incentives for borrowers to repay.

Setting the reserve factor to 99% ensures that nearly all accrued interest flows to the protocol. This measure minimizes the risk of nominal increase in value of bad debt.

We would like to note that as the complete shutdown of V2 draws near—and with the transition of the Aave Safety Module over to the Umbrella system—it would be opportune to consider using treasury funds to cover any remaining bad debt.