LlamaRisk Proposes Freezing $1.33B in Assets to Refocus Aave V3 Core on Blue-Chip Collateral

Risk management firm LlamaRisk proposed an Aave Request for Comment (ARFC) to reposition Aave V3 Core as a market dedicated exclusively to liquid, blue-chip collateral, according to the proposal ¹. As of Nov. 9, 2026, the reserves identified for deprecation held $1.33 billion in collateral supporting $1.03 billion in outstanding debt ¹. The initial proposal measure freezes each affected reserve, immediately halting new supply, preventing new borrowing against the collateral, and setting the loan-to-value ratio to zero across all associated E-Modes while leaving existing loans untouched ¹.

The scope centers heavily on leveraged staking and non-custodial bridge collateral ¹. As of Nov. 9, 2026, Kelp DAO's $rsETH and StakeWise's $osETH together account for $862 million of the debt, borrowed almost entirely as $WETH through correlated E-Mode looping strategies ¹. Bitcoin wrappers $LBTC and $tBTC, alongside liquid staking token $rETH, account for another $160 million in predominantly stablecoin debt ¹. Smaller exposures targeted for complete deprecation include $eBTC, BTC.b, tETH, PT-srUSDe-22OCT2026, and $LDO ¹. Under the plan, frozen reserves that still maintain more than $20,000 in active debt will see their reserve factor raised to 99%, directing incoming interest payments to the DAO treasury rather than suppliers ¹.

Shifting Complex Risk to Aave V4

LlamaRisk explained that Aave V3 Core's pooled liquidity model forces suppliers of $WETH and stablecoins to underwrite external operational risks without receiving extra yield, while leveraged looping borrowers capture the spread ¹. Core will purge exposure to restaking setups, leveraged wrappers, derivatives-backed strategies, and custom non-custodial bridges relying on purpose-built signers or enclave networks ¹. Instead, Aave V3 Core will retain primary assets like WETH, WBTC, cbBTC, wstETH, weETH, cbETH, native CDP and reserve-backed stablecoins such as $USDC, $USDT, GHO, and DAI, alongside tokenized gold, $AAVE, and $LINK ¹. Yield-bearing stablecoins such as USDe, sUSDe, and syrupUSDT will also remain on Core ¹.

According to the proposal, assets with complex dependencies will migrate to Aave V4 ¹. Aave V4 separates liquidity across hubs and spokes, utilizing collateral add and draw caps alongside a specific risk premium parameter that directly prices the risk of underlying assets into the borrowing rate ¹. Following the proposed freeze, LlamaRisk plans to coordinate voluntary, orderly unwinds with token issuers and major borrowers before considering follow-up controls such as stepwise liquidation threshold reductions or borrow rate hikes ¹.