Aave Reopens Frozen Pools, Constrains New Collateral Access

Emergency borrowing caps on Aave preserve enough capacity to return to pre-Binance hot-wallet levels, though LlamaRisk estimates the cuts remove roughly $3.8 billion of unused headroom.

In an October 30 update, risk-service provider LlamaRisk disclosed it had implemented reduced borrowing ceilings and temporary interest-rate adjustments across both Aave V3 and V4. Separate borrow-cap reductions for GHO on the Core and Prime markets remained queued.

These measures followed an October 29 emergency freeze, which LlamaRisk triggered after initially characterizing the exploiter’s Aave position as overcollateralized and vulnerable to standard liquidations.

Available Borrowing Capacity

Aave V4’s draw caps govern individual credit lines through which a lending market—known as a spoke—draws assets from a shared hub. Because reserves remain frozen, these ceilings cannot permit new borrowing.

LlamaRisk’s cap methodology commences with the larger of either borrowing levels prior to the exploit or borrowing at the observation time. It adds roughly two percent, applying asset-specific, rounded ceilings. The approach specifically targets the larger borrowing paths where over $10 million was borrowed pre-incident and where more than $10 million of spare capacity exists.

This strategy can drastically lower an existing ceiling while maintaining it above previous debt.

Debt repayments can still leave additional room beneath the same ceiling. As of October 30, Core USDC listed its cap was approximately 248.4 million USDC above debt because borrowing had fallen below its pre-exploit baseline.

Core WETH’s listed ceiling stood at 1.79 million WETH, surpassing then-current debt of 1,749,730 WETH. LlamaRisk used current debt as the sizing basis because it incorporated the exploiter’s 19,762 WETH loan.

Separately, the queued GHO changes would reduce Core’s ceiling from 150 million to 105 million GHO and Prime’s from 85 million to 35 million GHO—a combined reduction of 95 million GHO.

Liquidity and Borrowing Costs

During the freeze, new supply and borrowing were blocked, while withdrawals, repayments, and liquidations continued to function. Users also could not deposit additional collateral into frozen reserves.

Aave’s withdrawal guidance restricts exits to available, unborrowed liquidity. A supplier whose deposits secure a loan must also preserve the health of their position.

At 00:26 UTC on October 30, LlamaRisk reported that Core USDC utilization sat at 97.8%, with several other reserves operating at 100%.

Reopening supply allows new cash to enter the relevant asset pool, while repayments return borrowed assets to it. However, borrowing and supplier withdrawals both consume the pool’s available liquidity.

LlamaRisk also executed temporary Slope2 reductions. The recommendation lowers the steep portion of Aave’s borrowing-rate curve above its optimal utilization point. The proposed base rate, first slope, and optimal point remain unchanged, leaving modeled rates unaffected at or below that point.

Lower rates do not attract fresh deposits into a reserve rejecting supply, but reduced interest growth can ease pressure on borrowers without requiring them to repay principal or supply withdrawal funds.

Although LlamaRisk champions a universal 10% borrowing ceiling, its modeled full-utilization tables list different targets for specific reserves: 20% for Core DAI, 34% for Core USDtb, 25% for Monad mUSD, and 19% for Ethereum Core frxUSD. Plasma GHO’s proposed second slope sits at 5.25% in the summary and 11.5% in the specification.

LlamaRisk’s subsequent execution update does not specify which conflicting settings were deployed; consequently, borrowers cannot treat the broad 10% figure as a confirmed ceiling for every affected reserve.

Collateral Eligibility for New versus Existing Positions

LlamaRisk’s rollback plan outlines four waves, with only the V4 collateral-configuration wave explicitly marked as already executed in the 13:49 UTC update. For new borrowing, the plan maintains zero collateral borrowing power for USDT, USDC, USDT0, POL, WAVAX, sAVAX, XAUt, PAXG, and OP, including both wrapped and bridged versions. On V3, the zero Loan-to-Value (LTV) setting applies in E-Mode, while the equivalent restriction on V4 is a zero collateral factor.

Under these terms, the same tokens may be supplied, withdrawn, borrowed, and repaid once market restrictions are lifted, subject to liquidity and standard account constraints.

On V3, liquidation thresholds remain unchanged, so the LTV reduction does not alter existing health factors. On V4, a new borrow, collateral withdrawal, or collateral toggle can move an existing position onto the zero-factor configuration.

Furthermore, Aave’s V3 pool documentation adds an additional withdrawal condition: zero-LTV reserves must be disabled as collateral or fully withdrawn before withdrawing other assets.

Preserving aggregate borrowing levels preserves headroom under the ceilings. Existing users still require the relevant market permissions and collateral configuration, whereas suppliers must have sufficient unborrowed tokens to execute their exits. Together, these conditions and the actual rates deployed on each reserve determine what reopening delivers.

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