Simple Summary A proposal to pause ETH borrowing in the period leading up to the Ethereum Merge.

In addition, the original forum post also proposed transferring a one-time payment proxy in connection to the proposal. In this Snapshot vote, we also provide the options to vote for this payment.

Abstract Ahead of the Ethereum Merge, the Aave protocol faces the risk of high utilization in the ETH market. Temporarily pausing ETH borrowing will mitigate this risk of high utilization.

Motivation Full details are provided in the original forum post.

The risk of high utilization in the ETH market is driven by users potentially benefiting from the forked PoW ETH (ETHW) by borrowing ETH before the merge. High utilization interferes with liquidation transactions, thus increasing the chances of insolvency for the protocol. In addition, a high ETH borrow rate can make stETH/ETH recursive positions unprofitable, increasing the chances that users unwind their positions and drive the stETH/ETH price deviation further, causing additional liquidations and insolvency.