Aave lending markets affected by the precautionary response to the Binance exploit are open again, and the protocol's risk steward is preparing to reverse the temporary cuts made to high-utilization borrowing rates. LlamaRisk said on October 31 that the affected Aave V3 and V4 reserves are no longer frozen and are accepting new supply and borrowing. It separately recommended restoring each reserve's Slope2 parameter to its pre-incident value. That rate restoration is a proposed implementation step, not a change the forum post says has already been executed.

Reopening and rate restoration are different steps

The reopening restores normal supply and borrowing functions across the previously frozen reserves. During the freeze, Aave reduced Slope2 on selected markets to keep the maximum borrow rate near 10% for most reserves. The aim was to avoid penalizing borrowers when new supply could not enter. With deposits available again, LlamaRisk says those reduced curves now limit the rate response that can help rebuild withdrawal liquidity when utilization rises above its optimal point. The steward plans to implement the restoration through Aave's risk process, while the Horizon market requires an operations multisig.

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The proposal targets only the steep end of the curve

Slope2 determines how quickly variable borrowing costs rise after a reserve crosses its optimal utilization level. LlamaRisk said the base rate, Slope1 and optimal utilization would remain unchanged, so borrowers at or below that threshold would not be affected by the proposal. The difference becomes material when a pool is heavily used. On Ethereum Core V3, for example, the full-utilization rate for USDC would rise from 10% to 14.5%, while DAI would move from 20% to 40%. On Ethereum Core V4, USDC would rise from 9.5% to 25% at full utilization.

Why the steeper curve matters

A higher rate above optimal utilization can encourage repayment and make supplying liquidity more attractive, creating a market mechanism for lowering utilization. It does not guarantee immediate withdrawals: users still depend on the cash available in a particular reserve, and rates can change as utilization moves. The restoration also does not change borrowing costs uniformly. Most of the adjustment is concentrated in stressed conditions, when a pool has comparatively little unused liquidity.

Collateral controls remain a separate question

Aave's earlier rollback plan kept nine assets at zero loan-to-value on V3 or zero collateral factor on V4 for new borrowing: USDT, USDC, USDT0, POL, WAVAX, sAVAX, XAUt, PAXG and OP. Supply, withdrawal, borrowing and repayment otherwise resumed subject to available liquidity, while existing V3 liquidation thresholds were left unchanged. Independent reports from CoinDesk and CryptoSlate also described the reopened markets alongside continuing collateral restrictions. The October 31 rate proposal does not state that those separate controls were removed.

What to watch next

The next confirmation should come from onchain execution of the Slope2 updates, rather than the recommendation alone. Users can also watch utilization, available liquidity and variable rates on the affected reserves as the restored curves take effect. A separate decision would be needed to relax the remaining collateral controls, and LlamaRisk's rollback plan said the criteria for doing so would be evaluated later. The reopening closes the broad freeze phase, but it does not return every risk setting to its pre-incident state at once.

Sources

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