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Aave Community Takes Major Decision Before The ETH Merge

03 Sep 2022 By: Rohit Khandelwal
Aave Community Takes

The Aave community has overwhelmingly approved the proposal 

To temporarily halt Ethereum borrowing until the Merge, which will take effect immediately. 

The voting indicates that the community has agreed to halt Ethereum (ETH) borrowing in order to minimize high ETH borrowing risks on Aave during the Merge and Ethereum hard split.

Aave Community Approves to Pause ETH Borrowing

The Aave community voted on the governance proposal "Temporarily Pause ETH Borrowing between August 30 and September 2." The plan to temporarily suspend ETH borrowing and pay 60 AAVE tokens garnered the most votes, with 96.18% in favor.

Meanwhile, the options to temporarily suspend ETH borrowing and decide token payment in a separate proposal, to not pause ETH borrowing, and to abstain from voting received 3.07%, 0.13%, and 0.62% votes, respectively.

The community agrees to halt ETH borrowing and pay the MakerDAO 60 AAVE from the Aave treasury, hence preventing proxy in relation to the proposal. In fact, voters approved the plan with about 214k AAVE.

Aave argues that borrowing ETH before the Merge will let users to abuse the split Ethereum PoW token (ETHW). This puts the high utilization of Ethereum (ETH) on Aave before the Merge at risk. It may also result in negative liquidations and yearly percentage yields. As a result, Aave's insolvency risk grows.

Furthermore, high ETH borrowing might have an influence on Aave's stETH/ETH recursive borrowing situations. This may cause users to liquidate their positions, affecting the stETH/ETH peg. As a result, the crypto market may face additional liquidation and collapse.

With the majority approving the proposal to suspend ETH borrowing on Aave, the community has mitigated all risks. Furthermore, Aave DAO has already voted to approve the Ethereum Merge. However, the lending platform has denied any Ethereum hard fork.

Ethereum Merge Set to Happen Before the Anticipated Date

The probability of the Ethereum Merge occurring before the projected date of September 15 has increased as the average hash rate has surpassed 900 TH/s.

Vitalik Buterin stated that the exact date of the Ethereum Merge is determined by the hash rate. To trigger the Merge on September 15, the network needs an average hash rate of 872 TH/s. A higher hash rate will most likely cause the Merge to occur sooner.

Read also: Brazilian SEC Seeks to Modify its Stance on Cryptocurrency Regulation