Circle Economist Suggests USDC Rate Hike on Aave V3 Post-KelpDAO Exploit
- Gordon Liao proposed raising USDC’s Aave V3 Slope 2 rate to restore liquidity after a $292 million KelpDAO exploit.
- The KelpDAO attack on April 18 led to a loss of up to $15.1 billion in Aave’s total value locked (TVL).
- Aave’s USDC pool was at approximately 99.87% utilization for four days, with available liquidity below $3 million as of April 22.
- Liao’s proposal suggests increasing Slope 2 from the current rate to potentially reach a maximum borrower rate of about 53.5%.
- The incident highlighted vulnerabilities in cross-chain bridge infrastructure, resulting in significant unrecoverable losses for Aave markets.
The proposed changes aim to address the liquidity crisis triggered by the KelpDAO exploit by adjusting borrowing rates and utilization targets on Aave V3. This move is intended to encourage new supply and stabilize the market after significant outflows and high utilization rates.
A governance vote will determine if these adjustments, including raising Slope 2 to 50% and lowering optimal utilization, will be implemented to restore market balance following the exploit’s impact on liquidity and TVL levels.(Source)
