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Liam 'Akiba' Wright
DeFi Innovations

Why DeFi giant Aave is pulling the plug on six hyped blockchains making less than $5,000 a quarter

by admin
written by admin

In a July 29 forum-stage proposal, Aave risk service provider LlamaRisk recommended winding down the decentralized lender’s V3 deployments on Sonic, Scroll, zkSync, Metis, Soneium, and Aptos. The plan would put $4.1 million of debt on a staged exit path that keeps existing positions open during the initial step.

The Aave Request for Final Comments, or ARFC, covers 25 lending reserves with $12.8 million supplied, based on LlamaRisk data dated July 28. The forum thread still showed the request under discussion on July 31. Aave’s proposal lifecycle places an ARFC before a community Snapshot and any executable on-chain Aave Improvement Proposal.

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LlamaRisk’s economic case rests on support costs exceeding revenue. It said Sonic, Scroll, and zkSync each generate less than $5,000 in quarterly protocol revenue at current balances, while Metis, Soneium, and Aptos each generate less than $1,000. The proposal cites oracle, monitoring, and operational support costs but does not quantify the shortfall.

The same ARFC separately targets 50 individual reserves and 21 matured Pendle principal tokens across 11 deployments, with $85.3 million supplied and $11.5 million borrowed. Those balances sit outside the six-market totals.

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How the six-market exit would work

For the six full-market exits, every reserve would be frozen and its supply and borrow caps cut to 1. Reserves carrying debt would receive a 99% reserve factor and a 5% interest rate model base variable rate; unborrowed reserves would not receive those two changes.

The two settings act on different sides of the market. The 5% figure is the base-rate component applied to borrowing. The 99% reserve factor determines how interest revenue is divided, directing nearly all interest paid by borrowers to the Aave treasury and leaving little for supplier yield. LlamaRisk expects lower yield to encourage withdrawals, which raises utilization and gives borrowers a stronger incentive to repay.

Infographic explaining Aave’s proposed six-market exit: 25 reserves, $12.8 million supplied and $4.1 million of debt, initial freeze and cap changes, a 99% reserve factor, a 5% base variable rate, chain starting states, conditional later steps, and the separate reserve cleanup.Infographic explaining Aave’s proposed six-market exit: 25 reserves, $12.8 million supplied and $4.1 million of debt, initial freeze and cap changes, a 99% reserve factor, a 5% base variable rate, chain starting states, conditional later steps, and the separate reserve cleanup.

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