Risk Stewards: Supply and Borrow Cap Increases on Aave V3 / 2026.07.13

Summary LlamaRisk recommends the following parameter changes based on user behavior, on-chain liquidity, and position health observed in the latest review of Aave V3 reserves. Aave V3 Core: Increase borrow cap for USDT from 2,340,000,000 to 2,574,000,000. Aave V3 Monad: Increase supply cap for syrupUSDC from 80,000,000 to 160,000,000. Increase borrow cap for USDC from 50,000,000 to 67,500,000. Increase supply cap for WETH from 14,100 to 20,000. Aave V3 X Layer: Increase supply cap for xBETH from 5,700 to 11,400. Increase supply cap for xETH from 10,000 to 20,000. Increase borrow cap for xETH from 4,040 to 8,080. Increase supply cap for USDG from 5,000,000 to 10,000,000. Increase borrow cap for USDG from 4,250,000 to 8,500,000. USDT (Aave V3 Core) USDT has reached 94.8% borrow cap utilization (2,218,166,186 / 2,340,000,000) on the Aave V3 Core instance. Borrow Distribution Source: LlamaRisk, July 13, 2026 The top twenty USDT borrowers run health factors between 1.01 and 2.03 with a median of 1.30, all carrying outstanding debt. They borrow USDT predominantly against ETH and BTC collateral, so health factor stability across the cohort tracks the ETH and BTC prices. Recommendation We recommend raising the borrow cap from 2,340,000,000 to 2,574,000,000 on Aave V3 Core. The reserve stands at 94.8% borrow cap utilization, and the increase restores headroom to approximately 86% post-change utilization. The supply cap is held at 3,480,000,000. syrupUSDC (Aave V3 Monad) syrupUSDC has reached 100.0% supply cap utilization (80,000,000 / 80,000,000) on the Aave V3 Monad instance. Supply Distribution Source: LlamaRisk, July 13, 2026 The top twenty syrupUSDC suppliers run health factors between 1.01 and 1.15 with a median of 1.03, all carrying outstanding debt. They borrow USDC and USDT0 against syrupUSDC collateral within the stablecoin E-Mode, so health factor stability tracks the syrupUSDC price relative to its stablecoin debt. Recommendation We recommend raising the supply cap from 80,000,000 to 160,000,000 on Aave V3 Monad. The reserve stands at 100.0% supply cap utilization, and the increase brings post-change utilization to approximately 50%. The reserve remains non-borrowable. USDC (Aave V3 Monad) USDC has reached 90.8% borrow cap utilization (45,418,734 / 50,000,000) on the Aave V3 Monad instance. Borrow Distribution Source: LlamaRisk, July 13, 2026 The top USDC borrowers run health factors between 1.01 and 1.47 with a median of 1.04, all carrying outstanding debt. They borrow USDC predominantly against syrupUSDC collateral, so health factor stability tracks the syrupUSDC price relative to the stablecoin debt. Recommendation We recommend raising the borrow cap from 50,000,000 to 67,500,000 on Aave V3 Monad. The reserve stands at 90.8% borrow cap utilization, and the increase brings post-change utilization to approximately 67%. The supply cap is unchanged at 75,000,000, and further borrow headroom would require a corresponding supply cap increase. WETH (Aave V3 Monad) WETH is currently at 81.8% supply cap utilization (11,532 / 14,100) on the Aave V3 Monad instance. Supply Distribution Source: LlamaRisk, July 13, 2026 The top twenty WETH suppliers are predominantly unleveraged, with the majority holding WETH without offsetting debt. A small number carry debt at health factors between 1.15 and 1.79 (median 1.49), so most positions carry no liquidation exposure from this reserve. Recommendation We recommend raising the supply cap from 14,100 to 20,000 on Aave V3 Monad. The reserve stands at 81.8% supply cap utilization, and the increase brings post-change utilization to approximately 57.7%. The borrow cap is unchanged. Aave V3 X Layer The X Layer deployment is supported by a dedicated liquidation backstop that provides liquidation capacity for positions on the Aave market, which underpins the additional supply and borrow headroom in the changes below. xBETH (Aave V3 X Layer) xBETH has reached 90.5% supply cap utilization (5,161 / 5,700) on the Aave V3 X Layer instance. Supply Distribution Source: LlamaRisk, July 13, 2026 The top xBETH suppliers run health factors clustered near 1.06 (range 1.03 to 2.00), with the majority carrying debt. The top supplier is borrowing USDT while most of the remaining suppliers predominantly borrow xETH against xBETH collateral, so health factor stability tracks the relative price of xBETH and xETH. Recommendation We recommend raising the supply cap from 5,700 to 11,400 on Aave V3 X Layer. The reserve stands at 90.5% supply cap utilization, and the increase brings post-change utilization to approximately 45%. The reserve remains non-borrowable. xETH (Aave V3 X Layer) xETH is currently at 60.8% supply cap utilization (6,076 / 10,000) and 80.7% borrow cap utilization (3,259 / 4,040) on the Aave V3 X Layer instance. Supply Distribution Source: LlamaRisk, July 13, 2026 The top xETH suppliers are predominantly spot, with the largest position holding the majority of supply and thirteen of the top twenty carrying no debt. The remaining suppliers borrow USD₮0 against xETH at health factors between 1.28 and 1.74 (median 1.65), so most of the supplier base carries no liquidation exposure from this reserve. Borrow Distribution Source: LlamaRisk, July 13, 2026 The top twenty xETH borrowers run health factors clustered near 1.03 (range 1.03 to 2.00), all carrying outstanding debt. They borrow xETH predominantly against xBETH collateral, so health factor stability tracks the relative price of xBETH and xETH. Recommendation We recommend raising the supply cap from 10,000 to 20,000 and the borrow cap from 4,040 to 8,080 on Aave V3 X Layer. The reserve stands at 60.8% supply cap utilization and 80.7% borrow cap utilization, bringing post-change utilization to approximately 30% and 40% respectively. USDG (Aave V3 X Layer) USDG is currently at 9.4% supply cap utilization (469,349 / 5,000,000) and 5.6% borrow cap utilization (239,093 / 4,250,000) on the Aave V3 X Layer instance. Supply Distribution Source: LlamaRisk, July 13, 2026 The top USDG suppliers hold the asset on a spot basis with no offsetting debt. The supplier base is unleveraged, so these positions carry no liquidation exposure from this reserve. Borrow Distribution Source: LlamaRisk, July 13, 2026 The top USDG borrowers run health factors between 1.25 and 2.39 with a median of 1.56, all carrying outstanding debt. They borrow USDG against a diversified basket of stablecoin and X Layer token collateral, so the cohort holds comfortable health factor headroom at current utilization. Recommendation We recommend raising the supply cap from 5,000,000 to 10,000,000 and the borrow cap from 4,250,000 to 8,500,000 on Aave V3 X Layer. The reserve stands at 9.4% supply cap utilization and 5.6% borrow cap utilization, bringing post-change utilization to approximately 4.7% and 2.8% respectively. Specification Instance Asset Current Supply Cap Recommended Supply Cap Current Borrow Cap Recommended Borrow Cap Aave V3 Core USDT 3,480,000,000 — 2,340,000,000 2,574,000,000 Aave V3 Monad syrupUSDC 80,000,000 160,000,000 — — Aave V3 Monad USDC 75,000,000 — 50,000,000 67,500,000 Aave V3 Monad WETH 14,100 20,000 — — Aave V3 X Layer xBETH 5,700 11,400 — — Aave V3 X Layer xETH 10,000 20,000 4,040 8,080 Aave V3 X Layer USDG 5,000,000 10,000,000 4,250,000 8,500,000 Next Steps We will move forward and implement these updates via the Risk Steward process. Disclosure This review was independently prepared by LlamaRisk, a DeFi risk service provider funded in part by the Aave DAO. LlamaRisk is not directly affiliated with the protocol(s) reviewed in this assessment and did not receive any compensation from the protocol(s) or their affiliated entities for this work. The information provided should not be construed as legal, financial, tax, or professional advice. 1 post - 1 participant Read full topic