i agree with a lot of what stani says here in principle, but i have to call out that this post misrepresents how aave operates in practice aave is not an isolated lending market in the way people typically understand this term- while it is isolated from other curators, with everything managed under aave dao/aave service provider curation, each asset within aave core is connected with all others allowing for collateral lending and rehypothecation. @SebVentures put it pretty succinctly here: there are certain advantages to having upgradable market parameters- for example, it makes it simpler to update oracles if a pegged asset fails. but whether curation decisions happen at the level of market parameter upgrades or capital allocation decisions makes no difference in how curators respond to competitive pressure and profit motives aave dao+service providers face the same competitive pressures as any other curator while managing their users' assets. they want to achieve top line metric growth like tvl (see and increase their profitability, and they may be incentivized to cut corners or take actions that negatively impact the safety profile and risk adjusted returns of their users to achieve this. having upgradable markets does not remove principal agent problems inherent to risk curation, and while fixed fee contracts may help with incentive alignment, service providers will naturally cater to the preferences of key stakeholders to avoid being fired (independence within a dao model can be limited) effectively, as a unified market aave is tying the solvency of the entire protocol to the weakest collateral assets. one bad apple spoils the bunch - failure of one collateral asset could quickly spread to other markets as users rush to withdraw or borrow out any available liquidity. and because aave does not have a way to segregate high risk from low risk collateral assets it systematically underprices risk from long tail assets or tokenized hedge funds, which drags down risk adjusted returns for end users aave/compound style unified lending infrastructure has been a huge unlock for defi allowing more efficient capital formation, but it ultimately works best under a deliberately risk-averse strategy where all of the collateral assets have similar levels of tail risk (where it makes sent to charge a uniform risk premia across assets, and suppliers can be somewhat indifferent between which particular assets are backing their lent funds) in my view, aave has seen considerable mandate drift in the past 1-2 years, allowing flavor-of-the-month looping strategies to begin crowding out lower risk overcollateralized lending activity. so far, they have been able to retain users based on inertia and the strength of their brand (just use aave), but imo the market will put sharper focus on risk-adjusted returns over time. hopefully aave v4 will address some of the infra shortfalls that make v3 markets unsuitable for margining long tail assets and tokenized hedge funds. until then, users can always use other lending protocols that allow risk based pricing (eg. morpho) or adhere to low-risk-only collateral policy (sparklend) ultimately, diversity of curators and lending infrastructure is a good thing and it pushes everyone to do better for users. rather than trying to stifle competition, we should be demanding greater transparency and visibility into protocol and curator risk, to allow users to make informed decisions with their money. EF's focus on low risk defi, recent ratings initiatives from the likes of @CredoraNetwork and @SPGlobalRatings, and other initiatives yet to come will be key to making sure defi innovation continues moving the space forward, while minimizing tail risks and moral hazard