LlamaRisk Proposes Aave V3 Changes Affecting $1.33 Billion

By Nathan Brooks

LlamaRisk’s proposal covers about $1.33 billion in collateral and $1.03 billion in debt across Aave V3 Core, based on a Nov. 9 snapshot. The risk service provider proposes keeping Core focused on assets with established liquidity while allowing migration options for other positions.

The snapshot lists rsETH, osETH, LBTC, tBTC and rETH, alongside several reserves with smaller exposures. The proposal would freeze selected reserves as a first step, rather than immediately closing positions already funded against them.

LlamaRisk would keep Core focused on “established, liquid collateral.” The affected reserves would stop accepting new supply, and the proposal would set their loan-to-value ratios to zero.

What changes at the reserve level?

A zero LTV would leave no capacity for new loans backed by the frozen collateral. Existing borrowers would not need to unwind immediately, because the proposal keeps their positions open during the transition. The measure separates the treatment of existing debt from the admission of new supply.

LlamaRisk also addresses reserves already frozen but still permitting borrowing. Once outstanding debt exceeds $20,000, it recommends raising the reserve factor to 99%. That setting directs nearly all interest toward protocol reserves rather than suppliers, removing most of the economic reason to fund those positions.

The $20,000 trigger applies at the reserve level, not to the $1.33 billion aggregate snapshot.

tBTC is already frozen on Aave V3 Core. Its reserve-factor schedule lists 99% as recommended, up from 50% currently. A 99% factor would leave little interest income for suppliers and weaken the incentive to fund a position that cannot accept new supply.

How would migration work?

The plan contemplates an “orderly migration of affected positions to Aave V4.” LlamaRisk calls for migration discussions with issuers and large borrowers, whose positions and funding arrangements must adjust when collateral treatment changes across protocol versions.

If migration remains incomplete after several months, LlamaRisk outlines further steps: staged reductions in liquidation thresholds and interest-rate adjustments. The proposal does not specify values for those changes. Their effect would be to alter the collateral cushion and cost of carrying positions that remain open in Core, without requiring an immediate liquidation at the initial stage.

What does this change for Aave V3 participants?

For suppliers, Core would become a more focused market: selected reserves would no longer accept new supply, and the venue would concentrate on established, liquid collateral.

For borrowers, zero LTV would stop new borrowing against the affected assets, while existing loans would remain open during the proposed transition. The practical consequence is a proposed transfer of capital and positions toward Aave V4, with fallback measures determining the economics for anything left behind.

The next checkpoint is whether affected positions can migrate within the proposal’s several-month window. If they remain in Core, the plan calls for staged liquidation-threshold reductions and interest-rate adjustments, changing the terms for carrying open debt.