Risk Stewards: Change of Supply & Borrow Caps on Aave V3 Scroll / 2026.04.10

Summary The following supply and borrow cap changes are recommended to deprecate Aave V3 Scroll as part of the broader effort to sunset underperforming instances: Decrease supply and borrow caps for all assets on Scroll to 1. This effectively prevents any new exposure while allowing existing positions to unwind organically. Scroll Market State Source: Scroll TVL and DEX Volume, DeFiLlama, April 10, 2026 Scroll network activity has declined significantly following ether.fi’s announcement to migrate its credit card and cash product, “ether.fi Cash,” to OP Mainnet. Over the past seven days, total value locked (TVL) has dropped from approximately $227M to $23.3M. This contraction is reflected across other key metrics, such as stablecoin market capitalization decreasing from $55M to $14M, and daily DEX volume consolidating under $200K within the last week. V3 Scroll Instance The deprecation of Aave V3 on Scroll has been underway for some time, with the market already operating under conservative parameters, including a 50% reserve factor. As of April 10, 2026, the total market size stands at $12.19M, with $4.89M in borrows and $7.30M in available liquidity. Source: LlamaRisk, April 10, 2026 Approximately 90% of outstanding borrows are denominated in WETH, primarily driven by LST looping strategies. These positions operate at very low health factors (~1.00-1.05), making them highly sensitive to parameter changes. In the current state, the user health positions wouldn’t worsen but rather improve, as the monotonically increasing LST/WETH exchange rate used by the oracle would be applied. Source: LlamaRisk, April 10, 2026 The remaining ~10% of borrows are in USDC, mostly backed by WETH (~80%) and other derivatives, with relatively safer HF levels ( >1.5). At this stage, no immediate interest rate adjustments are proposed. However, if these positions do not unwind organically, changes to the interest rate parameters may be considered in a subsequent governance action to facilitate their gradual reduction. Liquidity The on-chain liquidity on Scroll for highly utilized Aave collateral-debt pairs, such as WETH/USDC, is very limited. Currently, users can only swap $38K WETH for USDC at a 6% price impact. This means that only about 10% of the active WETH-USDC positions can be liquidated profitably. Source: DeFiLlama, April 10, 2026 Recommendation Given the severely constrained liquidity environment, aggressive interest rate adjustments are not recommended, as they could destabilize the positions of low-health users. The recommended approach is to immediately reduce supply and borrow caps for all assets on Scroll to 1, preventing any new exposure. Subsequently, through an AIP, we’ll freeze the market (similar to Soneium, Metis, and ZKsync), increase the reserve factor to make supplying less attractive. At that stage, interest rate parameter adjustments may also be considered to facilitate the unwinding of remaining looping positions, if required. Specification Instance Asset Current Supply Cap Current****Borrow Cap Recommended Supply Cap Recommended****Borrow Cap Scroll WETH 5,000 4,500 1 1 Scroll weETH 5,000 1 1 - Scroll USDC 2,000,000 1,900,000 1 1 Scroll wstETH 1,000 500 1 1 Scroll SCR 1,500,000 1 1 - Next Steps We will proceed with implementing these updates via the Risk Steward process. Disclosure This review was independently prepared by LlamaRisk, a DeFi risk service provider funded in part by the Aave DAO. LlamaRisk is not directly affiliated with the protocol(s) reviewed in this assessment and did not receive any compensation from the protocol(s) or their affiliated entities for this work. The information provided should not be construed as legal, financial, tax, or professional advice. 1 post - 1 participant Read full topic