LlamaRisk, a risk adviser funded by the Aave DAO, proposed on Nov. 10 that Aave freeze three tokens on its V3 Core market: StakeWise’s osETH, Lombard’s LBTC, and Rocket Pool’s rETH. The goal is to keep Core for established collateral and move riskier assets to Aave V4. Two other assets, rsETH and tBTC, are already frozen on Core since April and Oct. 31, respectively. LlamaRisk counted $1.33 billion of collateral backing $1.03 billion of debt across all in-scope reserves. The DAO earns about $3.7 million a year from this debt.
Mechanics of the Freeze
A freeze blocks new deposits and borrowing while setting the loan-to-value ratio to zero. Existing positions stay "untouched and unaffected," according to the proposal. LlamaRisk CEO Adam Sadowski described a freeze as "a one-way valve where users can always exit, but no new exposure can come in." Most new exposure sits in osETH, with $279.4 million of collateral backing $256.6 million of WETH loans at about 14 times leverage. The plan raises the reserve factor to 99% on seven borrowable frozen reserves carrying more than $20,000 of debt. Borrow rates remain unchanged initially. If exposure does not shrink, LlamaRisk approves stepwise cuts to liquidation thresholds. As a final step, a higher WETH borrow rate targets leveraged loops. LlamaRisk stated, "We will not make abrupt parameter changes that would liquidate significant positions." This approach prevents sudden liquidations while slowly reducing risk. The firm clearly prioritizes stability over immediate revenue protection.
Governance Response
On Nov. 11, StakeWise’s founder asked LlamaRisk and the DAO to "move the proposed osETH freeze to a separate vote." The proposal remains an Aave Request for Final Comments on the governance forum. No vote had been posted to Snapshot as of Nov. 11. The request highlights tension between centralized risk management and individual project autonomy. StakeWise wants distinct treatment for its token rather than bundling it with others. This separation could allow faster or slower approval depending on community sentiment. The current status leaves the freeze pending until the DAO decides. LlamaRisk’s figures show substantial collateral at stake, making the decision consequential for liquidity. The proposal aims to clean up the core market without disrupting active borrowers. Users holding these tokens face no immediate loss of funds, only restricted access to new borrowing. The process continues with discussions on the forum before any formal voting occurs.
