LlamaRisk has proposed a new set of parameter changes for Aave V3 after reviewing reserve usage, user positioning and remaining headroom under existing caps. The recommendations cover Aave V3 Prime, Aave V3 Core and Aave V3 Arbitrum, with one increase to a supply cap and several reductions to supply and borrow limits.

The proposed update would raise the tETH supply cap on Aave V3 Prime to 20,000 from 15,000, while sharply reducing the tETH cap on Aave V3 Core to 1 from 300. It would also lower borrow caps for WBTC and cbBTC on Core and for WETH on Arbitrum. LlamaRisk said the changes will be carried out through the Risk Steward process.

Prime tETH demand drove the main increase

The largest upward adjustment in the review concerns tETH on Aave V3 Prime. According to LlamaRisk, the reserve currently holds 15,189 tETH, worth about $46.9 million, against a 15,000 cap. That places utilization at 101.3%, prompting a recommendation to lift the ceiling to 20,000.

If approved and implemented, the new limit would bring post-change cap utilization to roughly 75.9%. LlamaRisk linked the recommendation to where demand is actually concentrated, noting that tETH usage is centered on Prime rather than on Core.

Core tETH cap would be cut to halt new deposits

On Aave V3 Core, tETH supply has remained comparatively small. LlamaRisk said the reserve has stayed in a range of roughly 90 to 300 tETH since late April and currently stands at 286.78 tETH, or about $0.9 million. That is only around 1.9% of the tETH balance on Prime.

The proposal would reduce the Core supply cap to 1 from 300. LlamaRisk said this would stop new deposits on that instance without affecting existing positions. It described Core adoption as low, while demand for the asset has developed on Prime, where tETH is paired with wstETH debt in a dedicated E-Mode category.

LlamaRisk also highlighted concentration and leverage among the main tETH suppliers on Prime. The top suppliers have health factors between 1.02 and 1.07, with a median of 1.05, and all of them have outstanding debt. Supply is highly concentrated as well, with the largest single position representing 77.5% of the reserve. Every position in that cohort borrows wstETH against tETH collateral inside the tETH/wstETH E-Mode category, meaning health factors move with the tETH/wstETH exchange rate.

Borrow caps on Core and Arbitrum would be tightened

Beyond tETH, LlamaRisk recommended lower borrow caps for three assets where current usage sits well below existing limits. On Aave V3 Core, WBTC debt is 700 WBTC, about $57.3 million, against a 4,000 cap, or 17.5% utilization. Borrows are down 10.4% over the past 30 days, and the proposed new cap is 1,500, which would leave utilization at about 46.7% after the change.

For cbBTC on Core, debt stands at 128 cbBTC, worth roughly $10.5 million, compared with a 1,440 cap. That represents 8.9% utilization. Although borrows rose 24.8% over the past seven days, LlamaRisk still proposed reducing the cap to 500, which it said would leave post-change utilization near 25.7% while preserving room for further growth.

On Aave V3 Arbitrum, WETH debt totals 55,461 WETH, approximately $136.0 million, against a 135,000 borrow cap, equal to 41.1% utilization. With borrows described as broadly unchanged over the past 30 days, LlamaRisk recommended lowering the cap to 75,000, which would place utilization at about 73.9% under the new setting.

Implementation is set to proceed through Risk Steward

The full set of proposed changes is: tETH supply cap on Aave V3 Prime to 20,000 from 15,000; tETH supply cap on Aave V3 Core to 1 from 300; WBTC borrow cap on Core to 1,500 from 4,000; cbBTC borrow cap on Core to 500 from 1,440; and WETH borrow cap on Aave V3 Arbitrum to 75,000 from 135,000.

LlamaRisk said the next step is implementation through the Risk Steward process. Once executed, the updated parameters can be reviewed on the LlamaRisk Risk Stewards Dashboard.

Source: governance.aave.com