The Aave decentralized autonomous organization (AaveDAO) continued deliberations on April 5 regarding limits to Dai (DAI) collateral. Risk management consultants Chaos Labs proposed a new plan to decrease Dai loan-to-value ratios (LTV) by 12%, contrasting with Aave Chan initiative founder Marc Zeller's previous suggestion of a 75% reduction.

Aave, operating as a crypto lending platform across various blockchain networks, permits borrowers to take loans in one cryptocurrency while pledging another as collateral.

Governance is entrusted to Aave token holders, constituting AaveDAO. Dai, an algorithmic stablecoin collateralized by diverse cryptocurrencies like USDC and Ethereum, is issued by the Maker protocol under MakerDAO governance. MakerDAO faced criticism on AaveDAO forums after minting 600 million DAI, depositing it in a vault with decentralized lending protocol Morpho, with a proposal aiming to increase the vault's minting limit to 1 billion DAI.

Despite MakerDAO's assurance that the new DAI would be backed by stable collateral, skeptics expressed concerns over the riskiness of the stablecoin eUSD, utilized for collateral, prompting proposals for changes in Aave's Dai LTV.

Zeller proposed reducing Aave's Dai LTV to zero, aiming to prohibit Dai as collateral, citing concerns over its perceived riskiness. However, Chaos Labs recommended a 12% LTV reduction, allowing Dai to remain as collateral while demanding a higher collateral-to-loan ratio to mitigate perceived risks.

The ongoing debate also revolves around stablecoin eUSD, issued by the Ethena protocol, backed by Lido Staked Ether (stETH) and corresponding futures short positions. Despite discussions involving key stakeholders, including MakerDAO founder Rune Christenson, Morpho development team CEO Paul Frambot, and Zeller from Aave Chan, no formal vote has been scheduled regarding the proposed Dai LTV adjustments.