- A proposal by an Aave user to define a debt ceiling for one account has divided the protocol’s community
- A section of the community thinks that putting a limit goes against the ethos of DeFi such as being censorship resistant
- The account in question is believed to belong to Curve founder who has accumulated over $65 million of debt on the DeFi platform
A proposal by an Aave user to define the debt ceiling of one account has divided the protocol’s community with some noting that such a move goes against the ethos of decentralized finance (DeFi) which include being censorship resistant. The account in question is believed to belong to Curve founder Michael Egorov who has so far accumulated over $65 million of debt on the platform. The account has pledged Curve (CRV) tokens worth $185 million as collateral.
CRV Price Drop Could be Tragic
According to the proposal, a lack of a limit on how much the account can borrow leaves the door open for the user to add more debt and keep depositing more CRV as collateral, something that can easily become tragic for Aave users in case CRV price plummets and the position is liquidated.
Uhh seems like Curve’s founder has a $110m leverage position against his $CRV stack across all Defi.
If not repaid at some point (spoil: it prob won’t, my man is taking profit), this will cascade into a lot of bad debt for lending protocols https://t.co/kxwc0Sk65V pic.twitter.com/yhHp9JFWBV
— vapor (@trading_vapor) June 14, 2023
Those supporting the proposal believe that stopping the account from pledging more CRVs as collateral will force the user to honor the loan and discourage them from borrowing more funds.
Others have asked the DeFi platform’s governing body Aave DAO to start considering their “own users [who] have supplied the protocol with [borrowable funds], adding that the user seems to have no intention of repaying the loan.
User’s Health Factor is Sufficient
Those against the proposal have noted that the borrower hasn’t committed any wrongdoing, adding that the Aave user may consider CRV tokens to be highly undervalued and that “his health factor at this point is totally fine.”
Another participant criticized the suggestion saying that the DeFi platform is open for users to use as they wish and that Aave DAO shouldn’t meddle with what users do “with their funds.”
Although the proposal is yet to become an official Aave Improvement Proposal (AIP), it raises questions on whether DeFi platforms should sensor some user activities.
