TL;DR
- An Aave ARFC proposes higher collateral efficiency for ETH- and Bitcoin-linked assets.
- The proposal would raise WETH LTV to 81% and liquidation threshold to 84%.
- The parameters are still under governance discussion and are not yet live.
Aave governance is considering whether borrowers should be able to extract more capital against some of the protocol’s largest collateral assets.
A new ARFC proposes higher loan-to-value and liquidation-threshold parameters across assets including WETH, WBTC, cbBTC, wstETH and weETH.
WETH Could Move To 81% LTV
One of the headline changes would take WETH to an 81% loan-to-value ratio with an 84% liquidation threshold.
In practical terms, that would allow users to borrow more against the same amount of collateral before reaching the point where liquidation risk becomes critical.
The proposal covers deployments across Ethereum, Base and Arbitrum and is framed as a capital-efficiency adjustment based on current risk analysis.
Higher Efficiency Also Means Less Margin For Error
More borrowing power is attractive to users, but collateral settings are among the most sensitive variables in a lending protocol.
Raising LTV increases capital efficiency while narrowing the distance between maximum borrowing and liquidation.
That is why the proposal is moving through Aave’s ARFC process rather than being applied immediately.
The numbers being discussed are proposed parameters, not live settings.
If governance eventually approves them, the change would make some of Aave’s most established collateral assets more efficient for borrowers. Until then, existing market parameters remain in force.
This article was written by the News Desk and edited by Samuel Rae.
