Decentralized lending protocol Aave treated millions in liquidation Monday without incurring any new bad debt showing its resilience during market volatility, data from Chaos Labs shows.
The Crypto market wilted early Monday, with the price of Bitcoin (BTC), which dropped to nearly $ 91,000 from $ 100,000 as a concern for a renewed trade war between the United States and its top partner’s Canada, Mexico and China sent shock waves through financial markets. The slide returned later in the day after President Donald Trump paused customs duty on Mexico for 30 days.
The fixed two -way spray led to margin deficiency, which resulted in massive liquidation, the forced closure of positions on centralized and decentralized trading opportunities. Aave alone treated $ 210 million in liquidation, its highest single-day figures since the crash of August 5, the data shows. More importantly, the protocol avoided accepting new bad debt.
The protocol incurs poor debt when borrowers do not repay their loans and the security provided is insufficient to cover the outstanding amounts. The risk is higher under unstable market conditions, like those on Monday, where sharp price drop and low demand prevent the effective liquidation of security.
“Liquidations were carried out effectively across the protocol, most of which were performed at the Ethereum head.
Aave has essentially marketed the market’s stress test and demonstrated the effectiveness of its risk control measures and liquidation mechanisms. Its existing bad debt even fell by 2.7% due to the decrease in the value of debt assets.
Pseudonym Defi observer Leo paid tribute to Aave’s performance as evidence of Decentral Finance’s strong foundation, which includes “strictly security management and control through control, effective protocol design for liquidation, thick liquidity pools in the ecosystem.”
Adorable upgrades such as Aave V3.3, V4 and the umbrella updates indicate a promising future for the Defi industry, Leo said.
Version 3.3, which was announced in December, introduces a feature to detect and clear uncollateralized bad debts from liquidations, allowing umbrella, an automated debt management system, to deal with risk and lower protocol obligations. The version also helps control the structure of so -called dust debt, which are small amounts of debt that are difficult to clear or liquidate due to their insignificant value.
