Aave DAO Considers Cutting Ties with Sky's USDS

Aave DAO – the governance collective charged with safeguarding the integrity of the largest decentralized application in existence – is displaying overwhelming support to offboard Sky's USDS stablecoin as collateral from its lending markets.

What's the Scoop?

• Forum Post: On November 17, a governance forum post was submitted to Aave DAO asking participants to remove USDS as collateral and increase its risk factor across all Aave instances. The proposal cited the "negligible revenue" generated by USDS markets and the "asymmetric risks" created by new Sky Stars, which could impact Aave’s stability.
• Recent Snapshot: Early Aave DAO activity has indicated heavy support for Sky USDS offboarding, with 99.6% of DAO voting power agreeing to approve the above measures during a now-closed Snapshot temperature check that ran from November 28 to December 1.
• Governance Drama: Aave-contracted risk managers LlamaRisk and Chaos Labs both voiced support to offboard USDS. Sky founder Rune down played their concern, claiming those worried about USDS safety simply lack the "specialized knowledge to properly understand" the Sky ecosystem.
• Next Steps: With its USDS temperature check successfully passed, the Aave DAO will soon publish an "AIP" for a final vote to enforce the proposal.