Two Scenarios Could Decide Aave’s Financial Stability

[cryptobro]

According to LlamaRisk, the first scenario would distribute losses broadly across Ethereum and layer-2 users, resulting in about $123.7 million in bad debt. This approach reduces systemic shock but could still weaken confidence in rsETH if its value drifts away from Ether. Aave’s internal safety mechanism, the Umbrella model, may help absorb part of the losses, limiting long-term damage.

The second scenario is more aggressive, shifting the entire burden to layer-2 ecosystems like Arbitrum and Mantle. That would push bad debt as high as $230.1 million, increasing pressure on liquidity and potentially triggering further withdrawals. While Aave holds a sizable treasury as a buffer, the decision ultimately depends on how Kelp DAO chooses to handle the aftermath.

[madtrader]

or just dump all the damage on layer 2 and hope for the best