Aave Founder Says Asset Wind-Downs Driven By Risk Reduction, Not Layer 1 Or Layer 2 Strategy Shift
In Brief
Aave founder says asset wind-downs reduce operational risk, not a verdict on L1/L2, as protocol proposes removing 50+ reserves and six deployments.
Aave founder Stani Kulechov has clarified that the protocol’s recent decision to decommission dozens of low-adoption assets and six blockchain deployments is strictly a risk-management exercise and should not be interpreted as a statement on the viability of any Layer 1 or Layer 2 network.
In a post on social media platform X, he explained that the goal is to shrink Aave’s operational, technical, and economic risk surface so the decentralised lending protocol can concentrate on higher-impact priorities, including growing existing high-value markets and expanding into securities finance.
The proposal, prepared by risk service provider LlamaRisk, recommends offboarding 50 low-adoption reserves and 21 matured Pendle Principal Tokens across 11 Aave V3 deployments. It also calls for the full wind-down of six smaller deployments—Sonic, Scroll, zkSync, Metis, Soneium, and Aptos—which together cover an additional 25 reserves. In total, the initiative would affect approximately $98.1 million in supplied assets and $15.6 million in outstanding debt.
Stani Kulechov emphasised that Layer 2 networks remain critical to Ethereum’s user experience, citing Aave App’s Stable Vaults, which use a Layer 2 as an accounting layer to onboard mainstream users into decentralised finance. He also noted that networks such as Avalanche play an important role in bringing RWAs on-chain through institutional channels.
Governance Overhaul Follows KelpDAO Exploit
The reserve review is the first major exercise under Aave’s newly proposed Risk Framework, which was introduced in June following the roughly $292 million KelpDAO bridge exploit. That incident exposed the protocol to potential bad debt after stolen rsETH was deposited as collateral, prompting a shift from reactive risk management to a standardised, portfolio-wide approach. Under the new framework, assets and deployments that no longer justify the overhead of maintaining price oracles, liquidation infrastructure, and continuous monitoring are flagged for removal.
For affected reserves, Aave plans to freeze new deposits and borrows, reduce supply and borrow caps to one unit, and raise reserve factors on borrowable assets. Deployments slated for full retirement would see reserve factors increased to 99% and base interest rates hiked to encourage users to unwind positions. A companion proposal from LlamaRisk also targets long-tail reserves with elevated Chainlink price-feed risk, proposing to replace live feeds with fixed-price adapters.
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About The Author
Alisa, a dedicated journalist at the MPost, specializes in crypto, AI, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
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Alisa, a dedicated journalist at the MPost, specializes in crypto, AI, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
