/biz/ - Business & Finance

another unconventional way to deal with this thing would be for a whale to double down and borrow as much LINK as possible from aave
"unpark your LINK from aave retards reeee" doesn't really do much when you realize that the majority of that LINK is deposited there from big players and not retail investors

but if a group of whales were to borrow the rest of the LINK supply (potentially sacrificing their collateral, but with insane long-term implications) not to short it, but:
1. massively increase the interest rates that shorters and already overleveraged exchanges pay
2. trigger a massive demand for LINK buys, as aave's mechanism for a bank run is to reward liquidity providers with different tokens of equal value. these providers will then naturally be forced to buy their LINK back ASAP

this would naturally require someone deranged enough to take such a huge risk, or a group
that's why increasing awareness on this subject is important. remember, a guy who controlled 10% of the debt immediately pulled off within a few hours of his address being posted on /biz/

>>49745230
>why is this allowed? I feel like the code should not allow room for this to happen
it's called a shortfall event and has happened in the past

there are mechanisms against this, such as massively increasing interest rates to overborrowed assets, requiring more collateral, protecting users by paying them their missing coins in a different currency, etc

but while aave tries to discourage this from happening, if someone rich enough wants to do this there's nothing that can stop him