Aave proposal would cut V3 and V4 borrowing limits, removing about $3.8 billion in unused capacity
Aave may sharply reduce unused borrowing headroom across parts of its lending system after a proposal from risk service provider LlamaRisk. According to the Aave governance forum, the proposal calls for lower borrow caps on 27 reserves in Aave V3 and lower draw caps on six credit lines in Aave V4. The new limits would be set at roughly 1.02x pre-attack borrowing levels. The move follows Aave’s earlier decision to freeze V3 and V4 reserves after the Oct. 29 Binance hot wallet incident. If implemented, the changes would remove about $3.7 billion in unused capacity from V3 and another $130 million from V4. In one example cited for V3 Core, the WETH borrow cap would be reduced from 2.4 million tokens to 1.79 million, while USDT and USDC caps would be lowered to 2.56 billion and 2.27 billion respectively. LlamaRisk said the attacker still holds large amounts of ETH, stablecoins and governance tokens, creating the risk of quickly building large positions once markets are unfrozen. The proposed cap changes would be executed through the Risk Steward process before reserves are unfrozen in stages. GHO reserves are not included in this round of adjustments.
