The new security module Umbrella is launched, how can Aave staking security change?

On June 5th, Aave officially deployed the Umbrella Security Module. This module will be launched in phases, marking that AAVE will no longer directly bear risks. Instead, aToken holders will be responsible for risks, achieving a direct correlation between risks and returns.

What has the Umbrella Security Module changed?

The Umbrella Security Module is a core smart contract system for risk management and incentives in the Aave protocol. Compared with the previous security module, Umbrella, through the core contract Umbrella Core, uniformly manages multiple StakeTokens associated with a single Aave v3 pool, and is responsible for slashing and deficit compensation functions.

This module defines two deficit states:

One is the "Pending Deficit", which refers to the capital loss that has been slashed from StakeTokens but not yet made up for;

The second is the "Deficit Offset", which is a set threshold. When the pool loss is below this threshold, no slashing operation will be triggered.

For example, in the Aave v3 USDC pool on the Ethereum mainnet, if the set deficit offset is 500 USDC, only when the loss exceeds this amount will the corresponding waUSDC staked tokens be slashed.

In the specific process, when a pool has a deficit such as 1000 USDC, the automated system calls the slash function of Umbrella Core. Based on the preset 500 USDC deficit offset, 500 USDC worth of waUSDC tokens will actually be slashed. The slashed token funds are transferred to the Aave Collector, and these funds are no longer available for stakers to withdraw. Subsequently, an entity with coverage authority will call the coverPendingDeficit function, pull the corresponding funds from the Collector, and call the eliminateReserveDeficit interface of the Aave v3 pool to complete the loss coverage.

In terms of permission settings, Aave Governance is responsible for configuring asset pairs, adjusting slashing parameters, and contract upgrades. The slashing operation is open to all users and can be triggered according to the contract rules, ensuring that the system automatically responds to pool risks. The operation of covering deficits is only allowed to be executed by entities holding the COVERAGE_MANAGER_ROLE, ensuring that the fund flow is controlled and compliant.

In addition, Umbrella provides a matching user interface, supporting users to perform operations such as staking, redeeming, activating the cooling-off period, and claiming rewards. To simplify multi-step interactions, an MIT-licensed batch operation auxiliary contract UmbrellaBatchHelper is designed, facilitating third-party developers to integrate and optimize the user experience.

In general, the Umbrella Security Module improves the flexibility and transparency of pool risk control by introducing a refined deficit management mechanism and clear division of permissions, providing a robust technical foundation for the governance and operation of the Aave DAO.

What are the potential advantages and disadvantages of the Umbrella Security Module?

For the entire protocol and users, the Umbrella Security Module has the following pros and cons:

Potential advantages:

Refined risk management: Umbrella Core supports setting a "deficit offset" threshold. The DAO can set a specific deficit threshold to determine whether to trigger slashing, improving the flexibility in handling minor losses. For example, when the loss is less than 100,000 USDC, it can be covered by the Aave Collector first, avoiding the slashing of staked assets.

Modularity and scalability: The Umbrella core uniformly manages each StakeToken instance, supporting multi-network and multi-asset expansion, and facilitating the deployment of strategies at the governance level.

Open interfaces and UI support: It provides an open-source front end and an auxiliary contract (UmbrellaBatchHelper), enhancing the user interaction experience and facilitating integration and secondary development.

Potential disadvantages and risks:

Staking returns are linked to risks: Compared with the traditional Safety Module, stakers under Umbrella bear explicit slashing risks. When the pool loss exceeds the set threshold, StakeTokens will be deducted. For example, if the loss exceeds 500 USDC, the system will deduct the corresponding staked assets.

Slashed assets are non-recoverable: The slashed StakeTokens are sent to the Aave Collector to cover pool losses, and stakers cannot redeem them. The system covers risks through this mechanism, but users permanently lose the corresponding assets.

Dependence on permissioned role operations: For example, the fund coverage operation needs to be triggered by an entity holding the COVERAGE_MANAGER_ROLE. If there are delays in governance or operations, it may affect the efficiency of risk disposal.

The transition period mechanism is relatively complex: In the initial stage of Umbrella's launch, stkAAVE/stkABPT and Umbrella StakeTokens coexist. Users need to pay attention to the migration path and incentive changes to prevent misunderstandings or operation errors caused by adjustments.

The staking yield situation that users care about

In the Umbrella module, the staking yield of users is set by governance and dynamically adjusted with the total staked amount and the balance of the reward pool. Each type of StakeToken (such as waUSDC, waGHO) needs to be initialized through a governance proposal, configuring its target liquidity, maximum reward per unit time, and distribution cycle. The reward funds come from the preset rewardPayer address, usually the Collector of the Aave DAO or its sub-accounts.

Taking USDC as an example, if the target liquidity is 1 million USDC and only 500,000 is actually staked initially, the rewards within the unit time will be concentratedly distributed, and the yield will be relatively higher; as the staked amount increases, the yield tends to the target level set by governance. If the reward funds are insufficient or delayed in supplementation, the yield may decrease or even be interrupted.

It is worth noting that GHO stakers are particularly significantly affected in this migration. Because the target liquidity and annualized incentive ceiling set by the Umbrella module for waGHO are significantly lower than the subsidy level of stkGHO in the old security module, it may lead to the expected annualized yield dropping from 13% to about 7.7%, and may also affect the market demand and overall issuance rhythm of GHO.

In addition, unlike the old security module, Umbrella allows flexible setting of rewards by asset, making it easier to link with the protocol risk level. However, users' yields highly depend on the efficiency of governance and fund scheduling capabilities. It is necessary to pay attention to the governance progress and the status of reward pools in various networks to evaluate the trade-off between potential returns and liquidity risks.

Summary

In May 2025, Aave maintained relatively high liquidity on major chains such as Ethereum and Arbitrum. In addition, with the flash loan business fee rate of 0.09% and a relatively large loan scale, the protocol's monthly revenue reached about 39 million US dollars. Based on this, Aave's market share in the money market field exceeded 50%. Although the price of the AAVE token has not yet broken through the historical high, as a veteran DeFi project, its performance is relatively stable. Comprehensive operation indicators show that Aave's dominant position in the crypto lending market is still at a high point in the past two years.

The launch of the Umbrella Security Module reflects Aave's continuous advancement in product and risk management. The current business foundation is relatively solid. If the existing innovation rhythm is maintained, future performance is expected to improve. This continuous optimization and improvement also provides a reference for other DeFi projects. In an environment of increasing competition, the continuous update of technology and products is the key to maintaining competitiveness and achieving long-term development.

Disclaimer: The views in this article only represent the author's personal opinions and do not constitute investment advice on this platform. This platform does not guarantee the accuracy, completeness, originality, and timeliness of the article information, nor shall it be liable for any losses caused by the use of or reliance on the article information.