An ongoing crisis situation stemming from a large curve token collateral can be prevented by pausing all borrowing activity, Gauntlet argued in a Wednesday protocol.

Security firms are floating proposals to prevent future loans against $158 million worth of curve (CRV) tokens on Aave, a lending and borrowing platform, amid an ongoing situation that has put the entire DeFi ecosystem under stress since Sunday.

Gauntlet, which specializes in risk management, posted the proposal on Wednesday to the Aave community members, who have until August 5 to vote on the proposal.

“Gauntlet has been looking into the risk profile of 0x7a16ff8270133f063aab6c9977183d9e72835428. This account borrows roughly $54m of USDT against $158m of CRV, as of 2023/08/01,” the proposal read. “We recommend setting CRV LTV to 0 to help impede additional borrowing against existing CRV collateral due to the recent decrease in CRV liquidity.”

The loan-to-value (LTV) ratio is a measure comparing the amount of any collateral asset to the loan’s size. The higher the down payment; the lower the LTV ratio – and a zero LTV effectively means loans cannot be taken.

Curve Finance, a stablecoin swapping giant, suffered a Sunday exploit that drove down the price of the CRV token, putting a $168 million stash of founder Michael Egorov’s money at risk of being liquidated.

This created bearish sentiment for the tokens among traders alongside concerns that liquidated assets would have to be sold into a market where prices are already falling. The liquidation of such a large position could have put pressure on other DeFi protocols because CRV is used as a trading pair and ballast in trading pools across the ecosystem.

However, wealthy DeFi players such as Justin Sun have stepped up to purchase discounted crv from Egarov in an effort to shore up liquidity, as reported.

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Some $15 million of that amount has been earmarked for work performed directly by the team over the course of more than a year.

Aave Companies, a development lab overseeing crypto lending protocol Aave, is seeking over $16 million from the Aave community to pay for development work on the platform.

Decentralized autonomous organizations (DAOs) like Aave rely on community votes and proposals to determine their path. Decisions are made by token holders, who vote on issues, new developments, growth plans and other issues proposed by their communities.

“We propose that the Aave DAO retribute a total of $16.28M in retroactive funding to Aave Companies for the development of Aave Protocol V3,” Aave Companies wrote in a proposal to the Aave’s governance forum.

While the proposal isn’t scheduled to end until early U.S. hours Thursday, it has already reached quorum, with nearly 100% of votes supporting the funding. Community discussions on the governance forum were generally positive and supported the proposal.

The total includes $15 million for work performed directly by the team over the course of more than a year, with the rest required for costs paid to third-party audit services. Some 60% of the compensation would go to engineering-based roles, and 40% to non-engineering roles, such as design and product management.

The funding will consist of $5.4 million spread over stablecoins DAI, USDT and USDC, $1.1 million in other unspecified stablecoins, $3.3 million in “more volatile crypto assets” and $6.2 million in Aave’s native AAVE tokens.

Contributors to the Aave protocol included development firms BGD Labs, Certora, SigmaPrime, Llama, Gauntlet and Aave Companies, the proposal noted.

The V3 upgrade went live in March. It introduced cross-chain “portals,” isolated markets, a “high efficiency” mode and other features for a better user experience to compete with rival decentralized finance (DeFi) products in the crypto market, as reported.

Portals, one of the biggest improvements, allow users to swap assets from any blockchain on which Aave is deployed. Users can create “aTokens” – which represent deposits into Aave – on one chain and burn them on another. This feature opened up the possibilities of on-chain trading strategies, such as yield arbitrage, or taking advantage of the varying yields offered by the protocol on different blockchains.

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