Aave passes proposal: USDS LTV reduced to 0, collateral eligibility removed, reserve factor raised to 25%

The Aave community has passed a proposal to remove USDS collateral eligibility (setting LTV to 0), exclude it from e-Mode, and increase the Reserve Factor (RF) from 10% to 25%. The proposal is currently awaiting final execution of the AIP.

The main reasons are the decline in USDS yield contribution, low collateral utilization rate, and potential risk exposure arising from its issuance mechanism.

MakerDAO founder Rune responded by stating that the proposal misunderstands the lending methods of Stars to Sky via Spark, Grove, etc., as in fact, reasonable interest rates have been paid and settled regularly. He emphasized that if Sky significantly improves transparency and scalability in the future through Data Hub, Grove, and Sentinel Network, USDS still has the hope of returning to Aave's collateral asset list and promoting broader adoption.