Aave has temporarily frozen lending markets for 17 tokens in order to protect itself from future market manipulation attacks.
Aave is Ethereum’s largest decentralized lending protocol, with over $3.65 billion in assets locked across multiple chains.
Its decision to temporarily halt lending of several tokens on Aave version 2.0 was made after governance members approved a proposal from Llama and Chaos Labs to pause assets deemed “volatile” due to Aave’s low liquidity profiles.
Yearn.finance, Curve DAO, 0x, Decentraland, 1inch, Basic Attention Token, Ampleforth, DeFi Pulse Index, renFIL and Maker, Enjin, xSUSHI, and five stablecoins: sUSD, GUSD, RAI, USDP, and LUSD are among the lending markets.
For the sake of risk management, the protocol will not allow users to deposit these assets or take loans with them on the platform.
The proposal was approved just days after a trader on Aave opened a massive short position on the Curve DAO (CRV) market, resulting in $1.6 million in bad debt for the protocol.
Last week, a trader borrowed 92 million CRV ($57 million) on Aave and then sold the tokens continuously, causing the CRV price to plummet.
The trader, on the other hand, suffered a price squeeze as the CRV token price rose. Aave incurred a $1.6 million bad debt while liquidating the short position.
Although Aave stated that it had sufficient funds to cover the bad debt, the project hopes to avoid such incidents by freezing low-liquidity asset pools.