Research platform Block Analitica has identified possible risks associated with borrowing ETH in the Aave protocol during the period of network merger. The Aave community has voted to temporarily freeze the feature.
Block Analitica experts stressed that there is potential sentiment in the ETH market for a significant increase in borrowing, as investors intend to benefit at the time of the Ethereum merger and a possible ETHPoW hard fork. According to analysts, large borrowings against the backdrop of speculative investor interest may pose serious risks.
“In the run-up to the Ethereum merger, the Aave protocol may face the risk of high speculative borrowing in the ETH market. As a result, the market will be “overheated” and begin to experience high volatility. Under these circumstances, it may not be possible to liquidate regular ETH positions, which in turn will result in some positions becoming unsecured. Temporary freezing of ETH borrowing will reduce the risks of uncertainty associated with the ETHPoW fork and the merger in general,” reads a report prepared by the Aave team.
The Aave community agreed with the conclusions of Block Analitica experts – during voting 96% of the votes were cast in favor of the decision to temporarily freeze ETH borrowing.
Recall that in mid-August, Aave developers called on project participants to vote for the Proof-of-Stake chain after the merger of the Ethereum network, instead of recognizing any alternative fork.
Source: Bits
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