Members of the Ethereum community voted on Monday to freeze 17 assets in the Ethereum liquidity pool. This is to lower risk in the DeFi protocol before the network is upgraded to v3.
Decentralized finance (DeFi) protocol Aave has stopped people from borrowing and lending assets from its Ethereum liquidity pool. This is in response to a vote by its community of token holders to reduce risk and get ready for an upgrade to its protocol.
The Ethereum liquidity pool is the biggest on the Aave protocol, which has $5.6 billion locked up in liquidity across six chains. It will stop trading on 17 assets, including Curve (CRV), 1 inch (1INCH), Yearn Finance (YFI), and several stablecoins.
The proposal, which was written by the DeFi infrastructure company Gauntlet Network, is meant to keep Aave from getting into debt it can’t pay back. The company says that it will help the protocol move from version 2 to version 3 by allowing users to move their assets to the new network.
Nick Cannon, VP of Growth at Gauntlet, told CoinDesk that the proposal was also caused by the Curve token’s financial problems. A trader borrowed 20 million CRV from Aave and gave them to the crypto exchange OKX. The trader then “shorted” the coin, which caused its price to drop and Aave to lose $1.5 million.
Cannon said that putting these tokens back online is up to the Aave community, but they will probably go back to the protocol that works on the v3 chain. He also said that about 5% of Aave’s TVL is made up of these tokens.
Also, two more plans to stop borrowing on Uniswap (UNI) and Chainlink (LINK) were approved on Sunday. Cannon said that these tokens, which are part of the Ethereum liquidity pool, were added to make sure that the “robust tokens” were included in the effort to keep the assets safe.
Over the past year, the protocol has moved slowly and steadily to add more assets to its v3 network. Stani Kulechov, the founder of Aave, said in January that the protocol’s v3 upgrade would start to be used on seven chains, including Ethereum.
In an off-chain poll on Monday, the Aave community decided to let users move 26 assets from the Ethereum liquidity pool to the v3 network.
At the moment, the updated versions of Aave run on top of layer 1 networks like Avalanche, Fantom, and Harmony, as well as layer 2 networks like Arbitrum, Polygon, and Optimism which are based on Ethereum.
