Aave V4: DAO to Cover First Layer of Bad Debt in WETH, USDC, USDT
- —The DAO will cover the first loss layer: 33 ETH, 15,000 USDC, and 15,000 USDT
- —Underwriting targets: 800 ETH, 400,000 USDC, and 400,000 USDT over 6–8 weeks of lending growth
- —Underwriter exit: 20-day cooldown and 2 days for withdrawal, otherwise a new cycle
- —USDG and frxUSD excluded from initial coverage due to demand uncertainty
Why it matters: The mechanism shifts bad debt risk from liquidity providers to the DAO and underwriters, changing the risk model of the largest DeFi lending protocol.
Source: CryptoSlate