Aave DAO launches on-chain slashing mechanism Umbrella to improve efficiency and security.

Gate News bot message, Aave has launched a fully on-chain stake risk management system called Umbrella, aimed at replacing its original security module with a more automated and efficient framework.

Umbrella is developed by BGD Labs and approved by Aave governance, allowing users to stake interest-bearing aTokens such as aUSDC, aWETH, and GHO, thereby providing real-time, automated coverage for bad debts in the Aave protocol.

The plan was launched on Ethereum on June 5 and will be expanded to other networks, with the deployment of specific assets managed by Aave DAO.

Unlike the previous security module (which relied on AAVE and ABPT as collateral and required governance votes to trigger penalties), Umbrella allows for the automatic destruction of staked assets in the event of a funding shortfall, thereby reducing reliance on governance intervention.

This structural change enables Aave to instantly respond to on-chain liquidity shortages using interest-bearing Aave deposit tokens. Ultimately, the staking mechanism also serves as a rapid on-chain response buffer, protecting the protocol's solvency without interrupting user yields.

Users who stake aToken into the Umbrella system not only earn protocol rewards such as AAVE and GHO, but also receive basic returns from the underlying lending market. In return, they bear the risk of confiscation, but the confiscation risk is limited to the specific assets and networks deployed for staking.

Source: CryptoSlate

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