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AAVE Aave launches plan to phase out low-activity reserve assets
Aave is phasing out 50 asset reserves with low adoption rates in its lending market and plans to close deployments on six blockchains. On July 30, founder Stani Kulechov posted on the X platform stating that the move involved approximately US$98.1 million in supply and US$15.6 million in debt. At the same time, two new internal rulebooks have been introduced to prevent the agreement from continuing to carry assets that are rarely used.
Kulechov wrote: "Aave is phasing out 50 low-adoption asset reserves in multiple deployments." He also mentioned that Aave will orderly shut down deployments on Sonic, Scroll, zkSync, Metis, Soneium and Aptos, which involves another 25 asset reserves. He added that as part of this adjustment, 21 expired Pendle PT tokens will also be replaced with new expired products.
According to implementation instructions accompanying the announcement, risk management firm LlamaRisk and Aave service providers recommended removing multiple inactive Aave V3 reserves and closing six complete market deployments. These positions involved $85.3 million in supply assets and $11.5 million in debt.
The six blockchain deployments planned to close hold a total of US$12.8 million in supply and US$4.1 million in debt. On Ethereum, the two largest items on the list are Bitcoin liquidity pledge encapsulated tokens FBTC and eBTC, whose total deposits have dropped from $72 million about six months ago to about $16 million now.
Multiple bridging tokens, such as USDC.e and USDbC, are being removed because users have migrated to native versions. The reason why MaticX was eliminated is simple: its issuer Stader is recycling the token.
For the six chains that are about to be withdrawn, LlamaRisk said that each chain's deployment revenue is less than US$5000 per quarter, which cannot cover the oracle and monitoring costs needed to keep it running. Deposits on these chains had dropped significantly before the vote: Sonic dropped from $28.9 million to $7.6 million, and Scroll dropped from $16.1 million to $2.2 million, both in the past six months.
The official goal is to gradually remove agreement risk exposure, allowing users to exit positions in an orderly manner, while limiting liquidation risks. Under the default exit process, each reserve will be frozen and its supply and borrowing caps will be reduced to 1.
Oracle adjustments expand review scope to Aave V2 and V3
The proposal will also address oracle infrastructure. LlamaRisk's recommendations have identified a set of Chainlink price feeds related to long-tail assets in Aave V2 and V3 and propose to eliminate them. Chainlink classifies these feeds as high or extremely high operational risk because the underlying assets have lost significant adoption and liquidity, resulting in insufficient trading activity to support reliable pricing.
These oracle adjustments will affect 10 deployments and related assets, involving a total of US$6.76 million in supply funds and US$4.29 million in debt.
The reserve reduction comes months after Aave moved in two different directions. At the end of May, its two British subsidiaries were registered with the Financial Conduct Authority to conduct cryptocurrency exchanges and e-money services. Then in June, Grayscale Research released a report that estimated that AAVE's fair value within one year was close to $175, much higher than the current trading price. The report cited the agreement's share of the lending market, its approximately 200,000 monthly active users, and its move to forgo tokenized real-world assets through its institutional market Horizon.
