Following a successful governance vote, Chaos Labs is thrilled to join the Aave community as a full-time contributor.
Over the course of the next 12 months, Chaos Labs will focus on risk management and parameter recommendations for all Aave v3 markets, including:
- Risk parameter recommendations and tooling for the community covering:
- Collateral factors (LTV, Liquidation Threshold, Liquidation Bonus)
- Borrow & Supply caps
- Interest rates
- Asset listing risk analytics & tooling
- Open-sourced agent access
- Extending the AAVE v3 Risk Analytics App
- Community Risk Calls
For more information, the full proposal can be found here
Our primary focus for the initial 8-10 weeks of work will be on the first pillar of the engagement - Risk Parameter Recommendations for AAVE V3 markets, including LTV, Liquidation Threshold, Liquidation Bonus, and Supply Caps. The recommendations portal will be a community-facing, public dashboard allowing users to better understand the tradeoffs between specific parameters and transparency into the more detailed simulation methodology.
As the community discussion and vote were underway, our team started the model expansion and testing process to fully support Aave V3 and deliver a full suite of risk products to the Aave community.
We are currently iterating and enhancing the existing simulation engine and models:
- Expanding data pipelines and analytics to incorporate key AAVE v3 data points, including (but not limited to) enriched wallet data & profiling, asset correlations & volatility, on-chain, and off-chain liquidity, and trading volume
- Integrating AAVE-specific features and data into our Monte-Carlo simulation framework
- Conducting research and data analysis to continue to identify the relevant agents and behaviors in the AAVE ecosystem
- Emulating arbitrageurs’, market makers’, and liquidity providers’ effects on off-chain and on-chain liquidity; Borrowers’ behavior based on historical patterns; Liquidators’ operation across CeFi and DeFi venues under liquidity constraints (price impact and slippage)
- User-friendly and comprehensive Parameter Recommendation Dashboard to display simulation data, results, and recommendations
In addition to the above, we have been working on the Chaos Price Manipulation Tool to help better understand the feasibility and implications of market manipulation attacks (i.e., Mango) on AAVE markets. We view this tool as a critical component in determining protocol risk and will be an effective “white hat” tool to protect the protocol better. In the next few weeks, we will share more regarding functionality and access to help the community align on safeguards to this specific protocol attack surface.
Once the initial phase of Aave V3 risk tooling is launched, we will continue to enhance the suite of products with the additions of:
- Continuous parameter recommendations while incorporating community feedback and preferences into our models and simulations
- Expanding the parameter recommendations tool to provide support and analysis for E-Mode, Borrow Caps, and Interest Rate Curve changes
- Open-sourcing agents and simulation model transparency initiatives for feedback and public iteration so that all Aave stakeholders can contribute to securing the protocol with new agents and modeling techniques
- Asset Listing Portal - building on the parameter recommendations infrastructure, we will deliver tools to help streamline new collateral onboarding to the Aave protocol, which will provide insights into initial parameter and mode classification recommendations while projecting revenue opportunities for proposed assets
Chaos Labs will provide a monthly update post focusing on complete and ongoing works as determined by the community. Alongside major releases or ongoing risk assessments, we will host regular community calls and office hours for platform feedback and discussion.
We invite community feedback and would love to hear any comments and questions!
We continuously monitor the market and Aave pools for potential risks and will proactively communicate any concerns we see in the forums. Additionally, we are working with our relevant risk counterparts to discuss any proposals or updates to the protocol that might impact the security of user funds.