Aave addresses risks from MakerDAO’s DAI expansion

Aave has announced a proposal through its Aave Risk Framework Committee (ARFC) To adjust DAI stablecoin’s risk settings. Aave responds to MakerDAO’s bold D3M strategy, which quickly boosted DAI’s credit line.

The proposal, initiated by the Aave Chan Initiative (ACI), recommends setting the loan-to-value (LTV) ratio for DAI to 0% across all Aave platforms. Additionally, it suggests the removal of DAI incentives from the Merit program starting from its second round.

This measure is designed to safeguard against potential risks without substantially affecting users. It points out that only a small portion of DAI deposits are used as collateral on Aave, offering users the flexibility to opt for USD Coin as an alternative collateral.

The decision also reflects concerns over risky minting practices, as illustrated by the recent incident involving Angle’s AgEUR, which suffered a security breach shortly after its integration into EULER.

MakerDAO is advancing its “Endgame” plan, aimed at enhancing the platform’s resilience and fostering sustainable growth. This plan, detailed by co-founder Rune Christensen, outlines a phased approach, beginning with a comprehensive rebranding effort scheduled for mid-2024.

This development highlights the evolving dynamics within the DeFi sector as platforms adapt to market changes and strive for enhanced security and sustainability.

Also read:MakerDAO Plans to Allocate 600M DAI to USDe & sUSDe

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