Aave’s new proposal recommends adjusting DAI collateral risk parameters and setting LTV to 0

Aave Chan Initiative (ACI) launched a new ARFC proposal aimed at adjusting the risk parameters of the DAI stablecoin. The proposal suggests adjusting the loan-to-value ratio (LTV) of DAI to 0% on all Aave deployments and removing sDAI incentives from the Merit plan, effective from Merit Round 2 and beyond. This is intended to address the recent incentivization of MakerDAO's D3M plan, which has led to the DAI credit limit increasing from zero to a predicted 600 million DAI in less than a month, and potentially increasing to 1 billion DAI in the short term, thereby increasing the risk of DAI as collateral. Considering that only a small portion of DAI deposits are used as collateral on Aave and that users can easily switch to USDC or USDT as alternative collateral options, the purpose of the proposal is to reduce potential risks without significantly affecting the user base.