Aave, a prominent decentralized lending protocol, is strategically phasing out support for underused digital asset reserves and winding down operations on several smaller blockchain networks. This initiative, spearheaded by founder Stani Kulechov, aims to reduce the protocol’s economic and technical risk footprint. The move aligns with newly formalized risk and asset-listing frameworks.
The changes impact approximately $98.1 million in supplied assets and $15.6 million in outstanding debt. While substantial, this represents less than one percent of Aave’s total deposits, which currently stand in the mid-teens of billions of dollars. The protocol intends to focus resources on higher-impact markets and future priorities.
The decision to streamline operations stems from a comprehensive review conducted by DeFi risk service provider LlamaRisk and other Aave service providers. Their analysis identified numerous reserves and entire deployments that no longer justify their ongoing operational costs. Each reserve requires continuous maintenance, including price oracles, risk parameter monitoring, and ensuring reliable liquidations.
Aave’s new Risk Framework and Technical Asset Listing Framework guide these measures. The goal is to optimize the protocol’s risk surface, allowing it to operate more efficiently and securely. This proactive approach helps Aave adapt to the evolving landscape of decentralized finance.
The plan involves deprecating 50 low-adoption reserves spread across multiple Aave deployments. Additionally, Aave will orderly shut down entire markets on six specific blockchain networks: Sonic, Scroll, zkSync, Metis, Soneium, and Aptos. These six markets collectively account for another 25 reserves.
The protocol will also retire 21 matured Pendle Principal Tokens. These will be replaced with reserves linked to newer maturities, ensuring continued relevance and yield generation for users. The affected assets represent a small fraction of Aave’s overall activity but posed an outsized operational burden.
The six full market closures were selected due to sharp declines in activity, leaving revenue well below support costs. For example, deposits on Sonic fell approximately 74 percent to $7.6 million over the past six months. Scroll’s market dropped 86 percent to $2.2 million, and zkSync declined 88 percent to about $844,000. Metis saw a 79 percent decrease to $297,000, while Soneium plunged 95 percent to $173,000. Aptos currently holds about $1.7 million in supply, with liquidity down approximately 94 percent.
Each of these deployments now generates under $5,000 in quarterly protocol revenue, with some falling below $1,000. This revenue is insufficient to cover essential expenses like oracle maintenance and risk monitoring. Individual reserve removals target assets that have remained below usage thresholds, experienced steep deposit declines, or become redundant. This includes bridged versions of tokens already available natively, such as USDC.e and USDbC. Larger affected positions include certain Bitcoin-wrapped assets and matured Pendle tokens on Plasma, with $32.2 million in supply.
Aave designed the implementation process to be gradual, allowing users to exit positions without forced liquidations. Affected reserves will first be frozen, blocking new deposits, borrows, or collateral additions. Supply and borrow caps will also be reduced to minimum levels.
On the six retiring deployments, reserve factors are expected to rise to 99 percent, directing nearly all interest to the protocol treasury. Base borrowing rates will be set at 5 percent. These measures incentivize suppliers to withdraw their assets and borrowers to repay their outstanding debt. Once exposure declines sufficiently, live price feeds can be replaced with fixed oracles, and the markets will be fully discontinued. This careful approach aims to safeguard user funds during the transition.
Kulechov emphasized that these actions do not represent a judgment on the underlying chains or layers themselves. Instead, they are a strategic move to reduce Aave’s overall risk surface. This allows the protocol to concentrate resources on higher-impact markets and future innovations, including potential expansion into new areas. This focus ensures Aave can continue to advance decentralized lending protocols and its core offerings within the broader blockchain networks. Major financial institutions moving core operations onto blockchain networks highlight the broader trend of digital asset adoption, underscoring the need for protocols like Aave to maintain efficient and secure infrastructure, especially as assets like Ethereum continue to see institutional interest.
