Summary

The Aave v2 markets will be phased out from the IPOR USDC, USDT and DAI Indices and removed from the whitelisted asset management strategies.

Theme/Problem/Issue

Aave continues to deprecate its v2 market. Aave wants to actively encourage its users to migrate their supply and borrow positions to Aave v3. For this purpose, the reserve factor for USDC, USDT and DAI has already been increased several times, most recently on May 12th, 2024. The reserve factor is currently 50%. This leads to a large spread between supply and borrow rates.

The size of the Aave v2 markets has continuously decreased in recent months.

It currently only makes up around 10% of the composition of the IPOR USDC and USDC index and 25% of the DAI index.

At the same time, it is expected that the volatility of Aave v2 market interest rates will continue to increase as the size of the market continues to decrease.

Solution

The Aave v2 markets will be phased out from the IPOR Indices. The phase out period is 4 weeks.

Due to the low supply rate, the market is also removed from asset management whitelist.

Discussion

The relatively short phase out period, which corresponds to the phase out period selected in IIP-16 for the Compound v2 USDC market, was chosen to ensure that the Aave v2 markets are no longer included in the IPOR indices at the next reserve factor increase.

Pros/Cons

Pros:

• Cleanup of the index.
• Reducing the risk posed by increasingly volatile interest rates in a contracting market.

Cons:

• Slightly smaller market cap of the IPOR indices.

KPIs

To evaluate the success of this proposal, the following should be taken into account:

1. Volatility of the IPOR stablecoin indices

Timeline/Steps

1. Discussion: Discussion in the open governance forum for 3 days.
2. Vote: After this period the proposal will be moved to #formal-governance and a Snapshot vote will be held.
3. Implementation: as soon as possible
4. Monitor and evaluate the changes: After the changes have been implemented, it will be important to monitor their impact on IPOR and the community. This will involve tracking the KPIs mentioned earlier.

Resources

Technical

• Development tools
• Testing and deployment infrastructure

Financial

• Development budget

Skills/Budget

Skills

• Solidity and smart contract development skills
• Familiarity with DeFi protocols and concepts such as lending and borrowing and IRS
• Experience with Ethereum and the IPOR protocol

Budget

• Development costs for implementing the updates

Cost Estimation

The IPOR Labs team has already signaled that the costs considered for implementing these proposals fall within the software development scope and services rendered and paid for from the protocol’s initial funding.

Commitment

Transparency: The contracted developer will have a commitment to being transparent about the development and implementation of the proposal. This will include providing regular updates on the progress of the changes and sharing any relevant data or information with the community.

Community engagement: The contracted developer will actively engage with the IPOR community throughout the development and implementation of the proposal. This will include soliciting feedback from the community and incorporating their suggestions and concerns into the proposal.

Responsiveness: The contracted developer will be responsive to any questions or concerns raised by the IPOR community about the proposal. This will include providing timely and accurate responses to any inquiries from the community.

Accountability: The contracted developer will be accountable for the impact of the proposal on the IPOR Protocol and its community. This will include tracking the KPIs mentioned earlier and making any necessary adjustments based on the results.