Aave, the leading decentralized lending protocol, is taking steps to mitigate governance risks within the Ethereum layer-2 network, Scroll’s ecosystem. The initiative, proposed by the Aave Chan Initiative (ACI) on September 11, aims to address the growing instability in Scroll’s decentralized governance model.
The proposal includes various defensive measures to protect Aave’s users and liquidity pools. These measures involve increasing the reserve factor for all listed assets to 90%, reducing supply caps to existing levels, and lowering borrowing caps for all borrowable assets. By implementing these changes, ACI hopes to limit exposure to Scroll-based assets, enhance protocol safety through conservative risk parameters, and enable Aave to respond promptly to any governance disruptions.
The proposal will be executed through the Direct to AIP process, which allows for rapid deployment of urgent changes. Currently, Aave has approximately $6 million in total value locked (TVL) on Scroll, making it one of the chain’s smallest liquidity pools, as reported by DeFiLlama.
In parallel, Scroll’s DAO has been experiencing internal challenges, prompting Aave’s swift action. Scroll recently announced a temporary halt on new proposals within its DAO to revamp its governance structure. This pause will facilitate the exploration of governance models focused on efficiency, effectiveness, and alignment, ensuring short-term stability and setting the stage for sustainable growth.
While approved proposals will move forward, new submissions will be on hold until the new governance framework is established. This decision follows leadership changes within the DAO, with Eugene, the DAO lead, stepping down. This departure has disrupted ongoing proposals, including treasury management initiatives, the establishment of a governance council, and the testing of a DAO timelock mechanism.
In conclusion, Aave’s proactive approach to reducing governance risks on Scroll’s network underscores the importance of safeguarding user interests and ensuring protocol resilience. By addressing these challenges head-on, Aave is demonstrating its commitment to promoting a secure and stable decentralized finance ecosystem.