DeFi lending protocol Aave is deliberating ways to mitigate risk on its Aave V2 ETH platform after a $60 million short attack.

On Tuesday, Mango Markets exploiter Avraham Eisenberg was liquidated for $10 million after an unsuccessful attempt at shorting Curve tokens on Aave.

“The user has been fully liquidated, but despite this, Aave has accrued a much smaller (~$1.6M USD) bad debt position as of today’s CRV price,” said Aave developer lLlamaxyz on the governance forum.

Although Aave says the bad debt is isolated to the CRV market, the protocol proposed recapitalizing the system to make CRV whole. The proposal calls for using Aave’s risk management unit, Gauntlet’s insolvency fund, and Aave’s collector contract to cover the excess debt. 

The protocol also plans to revisit a discussion on the risk/return tradeoffs of allowing users to short certain assets. While risk mitigating functions like borrow caps that reduce the likelihood of insolvency exist on Aave V3, they are absent on V2 where a number of users still operate.

Another proposal from Aave developer Pauljlei addressed some of V2’s existing risks and proposed certain fixes. This proposal called for making parameter changes on Aave V2 ETH and “temporarily freezing” some markets.

Pauljlei named 17 tokens, including YFI, CRV, ENJ, MANA and MKR, as volatile assets that should be frozen.

“Aave V2 lacks many of the risk controls that Aave V3 solves for (supply caps, borrow caps, isolation mode, e-mode, etc). Out of an abundance of caution and given the community’s current lower risk tolerance, we recommend temporarily freezing the assets outlined above in an effort to derisk Aave V2 and promote eventual migration to V3,” he said.