Using the Ethereum Merge in route, the danger research and analysis team Block Analitica suggested a brief pause in Ether (ETH) borrowing to mitigate the potential risks which can lead to a decentralized finance (DeFi) implosion within the Aave lending protocol throughout the Merge.
They pointed the potential issue of high ETH utilization which may lead to liquidations being hard or impossible and annual percentage yields (APYs) reaching negative figures. In addition, the uncertainties all around the Merge along with a potential Ethereum proof-of-work (Bang) fork could cause liquidity providers to begin a financial institution run, pushing utilization to even greater levels.
Block Analitica suggested several solutions, together with a temporary halt for ETH lending around the Aave platform and growing the variable borrow apr (APR) at 100% utilization from 103% to at least one,000%.
As a result of the proposal, the marketplace risk assessment team Gauntlet network expressed support for that pausing of ETH borrowing. However, they recommended splitting up the proposal into a double edged sword and performing more analysis concerning the second solution presented by Block Analitica.
Within the finish, community people initiated the election to approve the pausing of ETH borrowing within the Aave platform. It’ll begin on August. 30, 2022, and finish on Sept. 2, 2022. With this particular, community people can pick whether or not they accept pause lending or otherwise.
Related: Bug bounty quadruples for Ethereum network — As much as $1M payouts in front of Merge
Aside from DeFi platforms, centralized exchanges also have expressed concerns and set up countermeasures for that possible implications from the approaching Ethereum merge. Crypto exchange Binance announced a week ago that they’ll pause ETH and ERC-20 token withdrawals to supply stability throughout the Merge.
Meanwhile, digital asset platform Coinbase stated that it’ll be reviewing any potential forks that could emerge from the approaching ETH Merge. Based on the firm, the assets is going to be reviewed in the same way just like any other asset that trades within its exchange.
