Aave Governance Weighs Proposal to Boost Borrowing Limits for ETH and BTC Collateral
Aave, a leading decentralized lending protocol, is considering a proposal to increase borrowing limits for Ethereum (ETH) and Bitcoin-linked assets. The proposal, currently under governance discussion, aims to raise the loan-to-value ratio for WETH to 81% with a corresponding liquidation threshold of 84%. This would allow users to borrow more against their collateral without reaching the point of critical liquidation risk.
The proposed changes cover various deployments across Ethereum, Base, and Arbitrum platforms. According to the proposal, the increase in borrowing power is intended as a capital-efficiency adjustment based on current risk analysis. However, raising LTV also means narrowing the distance between maximum borrowing and liquidation, increasing the sensitivity of collateral settings.
The numbers being discussed are proposed parameters and not yet live. If governance eventually approves them, the change would make some of Aave's most established collateral assets more efficient for borrowers.