Aave has resumed normal operations on its V3 and V4 platforms following an emergency freeze that began on October 29. According to CryptoSlate, the protocol’s risk management provider, LlamaRisk, executed a series of protective measures on October 30, including lowered borrowing ceilings and temporary interest-rate adjustments. These actions were taken to stabilize the protocol after an incident involving an exploiter’s position, which was initially assessed as overcollateralized but required immediate intervention to prevent further systemic risk.

Borrowing Caps Reduced to Preserve Liquidity

LlamaRisk implemented new borrowing limits designed to return market capacity to levels seen before the incident. The service provider estimates that these measures remove roughly $3.8 billion of unused borrowing capacity. For example, the borrowing ceiling for Core USDC was set at approximately 248.4 million USDC above current debt levels, while the limit for Core WETH was established at 1.79 million WETH. These figures were calculated based on pre-exploit borrowing levels plus a small buffer, ensuring that existing debt remains covered while restricting new leverage.

Additional changes are queued for the GHO stablecoin, which would see its borrowing ceiling on the Core market cut from 150 million to 105 million GHO. On the Prime market, the limit would drop from 85 million to 35 million GHO, representing a combined reduction of 95 million GHO. During the freeze period, new supply and borrowing were blocked, but users were still permitted to withdraw funds, repay loans, and execute liquidations.

Interest Rate Adjustments and Collateral Restrictions

To ease pressure on borrowers, LlamaRisk also executed temporary reductions to the Slope2 parameter in Aave’s interest rate model. This adjustment lowers the steepness of the borrowing rate curve at high utilization levels without changing the base rate or optimal utilization point. While the provider described a general objective of capping borrowing rates at 10%, specific reserves may have different deployed settings, such as 20% for Core DAI and 34% for Core USDtb, according to the modeled tables.

Collateral rules have also been tightened for new borrowing positions. Several assets, including USDT, USDC, and PAXG, have been set to zero collateral borrowing power on both V3 and V4. This means users cannot use these assets as collateral for new loans, although they can still supply, withdraw, or repay them. Existing positions on V3 retain their current liquidation thresholds, while V4 positions may move to a zero-factor configuration if users modify their collateral settings.

What to Watch Next

Market participants should monitor the execution of the queued GHO borrowing cap changes, which have not yet been fully deployed. Additionally, the actual interest rates applied to each reserve will determine the cost of borrowing as liquidity normalizes. Users should also be aware that withdrawal limits are tied to available, unborrowed liquidity, meaning that high utilization rates may temporarily restrict exit options for suppliers. The protocol’s return to full stability will depend on how quickly debt repayments and new supplies rebalance the asset pools.