Efficiency Mode (eMode)

Efficiency Mode (eMode)

The High Efficiency mode feature (or "eMode") is designed to maximise capital efficiency when collateral and borrowed assets are correlated in price.
The RISK_ADMINS and POOL_ADMIN, set by Aave Governance, can configure a maximum of 255 eMode categories, with each EModeCategory having following risk management parameters:
  • LTV (Loan to value)
  • Liquidation threshold
  • Liquidation bonus
  • A custom price oracle (optional)
💡 Category 0 is reserved as the default non-eMode category. All the assets listed on Aave V3, by default have category 0 (which indicates the standard operational mode).
All Assets listed on Aave V3 can be set to any of the pre-configured eModeCategory by the RISK_ADMINS or POOL_ADMIN.
The correct categorisation is not enforced on-chain and needs to be maintained by the RISK_ADMINS and POOL_ADMINS selected via the Aave Governance vote.
eMode also offers the possibility of introducing a specific price oracle for a certain category.

How it works?

If the user has supplied liquidity to the protocol, the user eMode category is set to 0 by default.
The protocol allows user to set the user eMode category to any of the eModeCategories configured by the PoolConfigurator given the following conditions holds true:
  • all the borrowed assets of the user are in the chosen category.
  • changing eMode doesn’t leave user position under-collateralised