Aave has resumed lending operations across its V3 and V4 markets following the security incident involving Binance.
The reopening restores access to most lending and borrowing services after precautionary restrictions disrupted activity across the protocol.
However, nine assets remain subject to collateral restrictions as Aave manages risks linked to the stolen funds. The decision follows several days of liquidity pressure and adjustments to borrowing limits across affected markets.
Aave restores lending markets with nine assets under restrictions
In its October 30 update, Aave confirmed that all markets had resumed operations. The protocol also stated that its smart contracts remained unaffected and user positions stayed fully secured.
However, nine assets still carry zero loan-to-value (LTV) ratios on V3 and zero collateral factors on V4. These include USDT, USDC, USDT0, POL, WAVAX, sAVAX, XAUT, PAXG and OP. The restrictions also cover their wrapped and bridged versions.
LlamaRisk confirmed the restrictions in its October 30 assessment. Users can still supply, withdraw, borrow and repay these assets. However, they cannot use the restricted tokens as collateral for new borrowing positions.
Existing V3 positions will retain their current liquidation thresholds and health scores. On V4, existing collateral parameters will remain unchanged until borrowers increase debt, withdraw collateral or modify an asset’s collateral status.
Binance hacker used Aave to borrow $44.6 million in WETH
Before Aave froze its markets, the attacker had already used the protocol’s lending services. Between 20:58 and 21:01 UTC on October 29, a wallet linked to the hackers deposited 60 million USDT into Aave V3 Ethereum Core.
The wallet then borrowed approximately 19,762 WETH, worth around $44.6 million at the time. Aave announced market restrictions at 21:42 UTC to prevent further deposits and borrowing activities.
The emergency measures halted new deposits and borrowing while allowing withdrawals, repayments and liquidations to continue. LlamaRisk’s October 30 report valued the position’s collateral at approximately $59.9 million. Its outstanding debt stood at $43.8 million, leaving the position overcollateralized.
LlamaRisk also stated that the position posed no risk to Aave suppliers.
Liquidity pressure forces Aave to adjust borrowing limits
The market restrictions created additional pressure across Aave’s lending pools. Suppliers could withdraw existing funds, but frozen reserves could not accept new deposits. Consequently, utilization across major stablecoin pools climbed between 92% and 100%, according to LlamaRisk.
Higher utilization normally pushes borrowing rates upward to attract additional deposits. However, the restrictions prevented fresh liquidity from entering affected reserves. Borrowers instead faced rising interest costs and increasing debt.
To address the pressure, LlamaRisk reduced Slope2 interest-rate settings. Meanwhile, reopening the markets introduced another risk by restoring access to billions of dollars in unused borrowing capacity.
Aave therefore tightened borrowing limits before restoring operations. LlamaRisk’s October 30 update showed that the adjustments removed $3.7 billion in unused borrowing capacity on V3 and another $130 million on V4.
Aave’s guardians subsequently reopened the markets in four waves, allowing most assets to regain their collateral functionality.
The incident also highlighted the connection between exchange security and decentralized lending. Although Binance suffered the breach, the attacker used Aave to convert stolen USDT into borrowed WETH.
Elliptic estimated the total Binance hack losses at $6.43 billion in its October 30 analysis. That figure exceeds four times the $1.46 billion stolen from Bybit in 2025.
Binance said it would cover losses through its SAFU reserve and corporate funds. The exchange also reported that approximately $3 billion had been frozen on-chain. However, freezing stolen assets does not necessarily confirm their recovery.
Meanwhile, Reuters reported that GSR experienced Bitcoin spreads five times their normal levels. Ether spreads also reached 2.5 times normal, highlighting the wider market disruption.
Aave’s reopening restores most lending services, but the remaining collateral restrictions show how security incidents can affect liquidity across decentralized finance.
