StakeWise founder Dmitri has asked Aave governance to vote separately on freezing osETH, the protocol's staking token, after risk adviser LlamaRisk proposed closing it to new lending exposure on Aave's V3 Core market on November 10.
LlamaRisk's analysis valued osETH collateral at $279.4 million, backing an estimated $256.6 million of wrapped Ethereum (WETH) debt. The adviser estimated leverage at around 14 times in Aave's ETH-correlated efficiency mode, where osETH held a 93% loan-to-value limit. The 10 largest positions accounted for 66% of the attributed debt.
According to LlamaRisk, V3's shared lending pool exposes WETH and stablecoin suppliers to collateral risks while borrowers collect additional spreads from looping strategies that use borrowed funds to build larger staking positions.
In response, Dmitri argued that StakeWise had experienced no hacks or validator slashings since January 2021 and highlighted immutable, native leverage contracts that return borrowed ETH directly from validators. He requested a separate vote to let governance weigh these arguments against lending-risk criteria and give StakeWise time to address concerns before reassessment.
LlamaRisk's proposed freeze would set osETH's borrowing limit to zero, allowing existing borrowers to repay or migrate to alternative collateral already available within the same efficiency mode, including wstETH, weETH, cbETH, and WETH.
If migration fails to reduce exposure, the proposal identifies a WETH base-borrow-rate increase as a last resort, potentially reaching up to 1% in 0.5% increments. Proposed rebates would offset the increase for WETH borrowers holding neither rsETH nor osETH, with an accompanying reserve-factor adjustment to maintain supply rates.
