The post Aave DAO activates on-chain slashing mechanism with ‘Umbrella’ launch appeared on BitcoinEthereumNews.com.

Aave has launched Umbrella, a fully on-chain staking-based risk management system designed to replace its legacy Safety Module with a more automated and capital-efficient framework. Built by BGD Labs and ratified by Aave governance, Umbrella allows users to stake interest-bearing aTokens, such as aUSDC, aWETH, and GHO, to provide real-time, automated coverage for bad debt across the Aave Protocol. Aave Umbrella roll out The rollout began June 5 on Ethereum and will expand to other networks, with asset-specific implementations managed by the Aave DAO. Unlike the previous Safety Module, which relied on AAVE and ABPT as collateral and required governance votes to trigger slashing, Umbrella enables staked assets to be burned automatically in the event of a deficit, reducing reliance on governance intervention. This structural shift allows Aave to respond instantly to on-chain shortfalls using interest-bearing Aave deposit tokens. The result is a staking mechanism that doubles as a rapid on-chain response buffer, protecting the protocol’s solvency without interrupting user earnings. Users who stake aTokens into the Umbrella system receive base yield from the underlying lending markets alongside protocol rewards such as AAVE and GHO. In return, they accept the risk of slashing, which is confined to the specific asset and network where the stake is deployed. For example, staking aUSDC contributes to USDC deficit coverage only, a design that isolates risk and avoids broader contagion across assets. Cooldown and withdrawal periods are encoded into the system, with a 20-day lock-in and a two-day redemption window. Umbrella structured around three smart contracts Per the activation proposal posted on Aave’s governance forum, Umbrella is structured around three key smart contracts: StakeTokens, which manage individual asset staking; Rewards Controller, which dynamically adjusts incentives based on a mathematically modeled emission curve; and Umbrella Core, which monitors Aave V3 liquidity pools and initiates slashing…

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Filed under: News - @ June 6, 2025 9:20 am