A governance proposal on Aave's forum, authored by Robby Greenfield IV with support from LlamaRisk and AaveLabs contributors, calls for a tiered LTV reduction framework and maximum wrap-depth limits for all restaking and bridged liquid staking tokens listed as collateral. The proposal directly attributes $123.7 million to $230.1 million in Aave bad debt to the decision to grant rsETH eMode status at 93% LTV despite the asset being wrapped four times from base ETH through Kelp, EigenLayer, LayerZero, and a final L2 copy.
For Armada's crypto repo desk, this proposal functions as a real-world risk framework from the largest decentralized lending protocol. The wrap-depth ineligibility concept is directly applicable: Armada should establish its own maximum acceptable wrap depth for LRT and bridged collateral, and apply tiered LTV reductions where wrapped assets are accepted. Aave's own service providers treating four-wrap depth as the failure point provides a concrete calibration anchor for Armada's collateral policy.