Following the Curve Finance exploit, Aave is searching for ways to distance itself from CRV token.
Aave's decentralized community (DAO) is contemplating a strategic shift to lessen its association with the Curve DAO token, CRV.
On August 10th, the community began voting on this matter, triggered by mounting concerns over substantial borrowing from Curve Finance’s chief, Michael Egorov.
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Representing Curve Finance, CRV is a staple in the decentralized finance (DeFi) ecosystem. Earlier this year, Egorov took a bold step by pledging a whopping 30% of the entire market capitalization of CRV, facilitating a loan acquisition nearing $60 million on Aave v2.
However, this financial configuration was jeopardized following a breach in Curve’s security on July 30th. This incident adversely affected the token's value, pushing Egorov's holdings to the brink of liquidation.
Two distinct proposals have been presented to Aave's tokenholders, with voting open until August 12th. The first offer suggests a decrease in the liquidation threshold for CRV on Aave v2 by 6%. Should this be ratified, several user accounts on Aave could face imminent liquidation.
The other proposal offers to halt CRV borrowing on the Ethereum and Polygon v3 platforms, thus negating the capacity to short CRV through Aave's mechanism.
At the time of writing, the response has been significant, with 100% of votes lodged to recalibrate Aave’s exposure to CRV.
In light of apprehensions regarding Egorov’s loans and the possibility of liquidation, another proposal, ending its voting phase on August 11th, has been brought forward.
Marc Zeller, the founder of Aave Chan, advocates for Aave’s Treasury to purchase CRV tokens from Curve amounting to $2 million. He believes this gesture will underscore DeFi stakeholders' commitment to maintaining a robust ecosystem. So far, almost 58% agree with the proposal, while 42% remain skeptical.
The unfolding events in Aave's realm underscore the complex interdependencies in the DeFi ecosystem. The choices made by Aave's community in the forthcoming period will not only determine their platform's trajectory but might also shape broader DeFi operational norms in response to security threats.
