The Aave cryptocurrency loan and lending platform’s annual return on investment (APY) has soared to record levels after capital withdrawals drove the decentralized financial protocol (DeFi) into a liquidity crisis. At press time, the variable APY of the Dai stablecoin loan via Aave is up 24.88% from 6.50% the previous day.
To the cryptocurrency researcher Igor Igamberdiev, the personality of the blockchain space, Justin Sun has been responsible for at least billions of dollars in withdrawals in the past few hours. The Total Locked Value (TVL) in Aave fell from $ 17.89 billion the previous day to $ 14.7 billion, according to DeFi Pulse.
In a series of tweets Aave developer revealed that the financial modeling platform Gauntlet Network has introduced an Aave Enhancement Protocol (AIP) to preventively deactivate the loan function for xSUSHI and DeFi Pulse Index (DPI) tokens. In addition, the AIP also called for the tokens of the Automated Market Maker Liquidity Provider (AMM) to be deactivated as an additional security measure on Aave’s AMM marketplace.
Earlier this week, members of the Aave community expressed concerns about the security flaws in using xSUSHI tokens as collateral for loans on the platform. The developers at Aave they claimed that the team at Gauntlet Network ran simulations that showed that it would not be economically feasible to use xSUSHI tokens in Aave. However, the Aave developers claim that the Gauntlet Network introduced the AIP despite these findings. The AIP is currently in the voting phase, with the majority of the votes in favor of “yes”.
Before today’s capital city escape, Aave was the most popular DeFi protocol classified by Defi Llama. The platform has a lot of appeal among crypto enthusiasts looking for income farming opportunities or taking out a stablecoin loan by depositing their holdings as collateral.