March 24, 2023

To summarize:

  • Decentralized finance protocol Aave has suspended ether (ETH) lending.
  • In light of Ethereum’s upcoming proof-of-stake upgrade, Aave’s community voted for the decision.
  • The agreement recorded higher loan utilization rates prior to the merger.
  • Aave’s decision came shortly before the first of two phases leading up to Ethereum’s final PoS transition went live.

Aave is a decentralized financial lending protocol powered by the Ethereum blockchain. community vote Support is on hold as the merger nears. The merger is Ethereum’s shift from proof-of-work consensus to proof-of-stake.

Crypto users can leverage Aave’s protocol to borrow Ether, the native digital asset on the Ethereum blockchain. Notably, the DeFi giant saw an increase in borrowing demand in the weeks leading up to the merger.

Simple FX
Simple FX

The Aave community voted on a proposal called “Temporarily Suspend ETH Lending”. The proposal is built around concerns that Ethereum’s PoS upgrade could spark a spike in loan utilization on Aave.

Aave’s utilization represents the percentage of ETH lent to the amount of ETH remaining in the protocol pool. As anticipation surrounding Ethereum’s PoS upgrade continues to heat up, liquidity issues are central to the community.

A major concern is that utilization could reach 100% and put Aave’s protocol in a liquidity bottleneck. In fact, a proposal supported by 96.18% of the community votes can act as a deterrent to a liquidity crisis.

On-chain analytics agency Block Analitica echoed similar remarks, stating that “a temporary moratorium on ETH lending will mitigate the risk of this high utilization.”

Ethereum’s Bellatrix upgrade succeeds, merger closer than ever

Ethereum’s Bellatrix upgrade is scheduled for September 6, 2022, as core ETH developers and cryptocurrency proponents have come to expect. The event marked the first of two phases that included a merger, a major upgrade for the Ethereum network.

ETH reacted to the Bellatrix upgrade with a 6% increase in the asset’s price. Following the news, the cryptocurrency was trading at around 1669, according to data from Transaction view.

Aave suspends ETH lending as Ethereum Bellatrix merges and upgrades to launch 13
ETH daily chart (Source: TradingView)

Paris, Phase II merge According to a tweet from Ethereum founder Vitalik Buterin, it is expected to happen sometime between September 13th and 15th.

As of press time, Ethereum’s Bellatrix upgrade has been successfully delivered with a network participation rate of over 94%. Going forward, developers will cancel public testnets such as Kiln and prepare for the Paris upgrade later this September.

Aave suspends ETH lending as Ethereum Bellatrix merges and goes online14
Ethereum Merger Schedule

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