V5 Vault Collateralization Issue

V5 Vault Collateralization Issue

A few days ago we discovered that the default PT 4626 vault is overly sensitive to Aave market liquidity. The vault incorrectly thinks it is under-collateralized when it has more assets deposited than what is liquid in the Aave market.

Immediate Impact

  • A Vault does not allow deposits if it thinks it is under-collateralized. This means that users cannot deposit into vaults whose underlying Aave lending market supplied - borrowed is less than the vault deposits.
  • User account balances in the Cabana UI may appear to have decreased. This is because we are showing the collateral value of their vault shares, rather than their full deposit amount. This will be fixed today so that we show the users their true balances. We’re also going to disable the withdraw button if the vault is under-collateralized, so that users don’t make a mistake. This is just a short-term fix and we’re going to work on a better experience next week.

Affected Vaults

At the moment we’ve only seen this issue with the USDC Vault and the Dai Vault.

Both V1 and V2 of the Vaults use the above logic. We haven’t had this issue before because our vaults never held more than the liquid assets in an Aave market. However, the new USDC vault is for a small market with high utilization, so the vault is affected by the limited liquidity.

Next Steps for Depositors

G9’s recommendation is to avoid withdrawals from the USDC Vault for the next few days. Your funds are safe! Take advantage of the high-APR rewards that have been added.

We’re going to roll out changes to the Cabana app soon that will make it easy to see when you are withdrawing your full deposit.

Regardless, the vault will remain active and winning prizes indefinitely.

Next Steps for Generation Software

Our immediate steps will be to roll out some quick changes to the app to help ensure depositors don’t withdraw at the wrong time.

Next week we’re going to take a deeper look at improving the user experience of the app for these vaults.

Longer-term, we’re going to prioritize a custom vault for Aave-style lending protocols. We should not be limited by the available liquidity in a market. We will need a custom integration for the optimal user experience. Ideally we’ll roll this out in the next quarter.

Next Steps for PoolTogether

Get the message out! If anyone is concerned about their deposit then make sure they know that their funds are safe, and that we’re working on getting the app improved so they can see their deposits properly. This shouldn’t take long.

Longer-term, once Generation rolls out the new Vault Factory then new vaults need to be created and depositors migrated to them. Ideally it can be incentivized, which should funnel depositors from the old vault to the new one.

Generation will support the PT community to ensure this process is smooth.

More Details

You can see the original discussion thread in Discord here. If there are any questions, then you can use that channel. There are lots of people available to answer questions!


Update: Collateralization Cap reached for USDC & DAI

The year came to a close with perfect conditions to kick off the road to the Million Dollar prize. Bonus rewards for five prize vaults started fueling the growth of the PoolTogether hyperstructure and V5 reached $2m in TVL.

While the collateralization issue is non-critical and doesn’t put any funds at risk, it prevents V5 prize vaults from scaling and is impacting user experience. Both the naive USDC prize vault and the DAI prize vault have reached their collateralization cap


  • Deposits and OP Rewards for the native USDC and DAI prize vaults have been paused.
  • wETH & USDC.e prize vaults continue to accept deposits.
  • OP Rewards continue on the wETH vault.

What now?

For now the time being, we’re pausing the deposits and rewards for the USDC & DAI prize vaults. If you have a deposit on any of these vaults you will continue to be eligible for winning prizes.

The USDC.e and wETH prize vaults will continue to accept deposits. Both prize vaults are tapping into massive Aave v3 markets and are unlikely to outgrow their counterparts.

Both interfaces (app.cabana.fi & pooltime.app) have been updated to accommodate a smooth user experience and adapted messaging.

What’s next?

The team of Generation Software is working hard on a custom vault implementation for Aave-style lending protocols. We are going to redeploy the PoolTogether V5 vault factory and vaults for DAI and native USDC following the development and a thorough audit. The OP rewards will be restarted once these roll out!

We’re also preparing for the first LST prize vault on PoolTogether V5. More on that in the coming weeks.


If you have questions or need help say hi on Discord or Farcaster. You can stay up to date with all things PoolTogether by following us on Twitter, Lens, and Mirror.

See you by the pool!

Ok let me take the part of PT and PT treasury.

PT as a business counterpart to G9 should ask accountability for the work done and paid for.

We paid, with almost no scrutiny or market comparison, for the vault and the vault delivered had a problem that must be fixed.

In light of the good relationship between G9 and PT I would not make it a bigger problem that it is, but it is common sense to ask the fix with no further costs.

This is needed urgently.

There is a second problem on top of that: fix need to be audited and the audit need to be paid.

I propose a 50/50 split of the cost of the audit, in view of the good relations, or we could batch the fix in a future audit among next deliverables to be audited.

Can we see the audit quotation? Can we talk to them?

Let me ask: is it possible that a subsequent audit for a small fix of something that has been audited not long ago costs so much like a new audit from zero? If there is this bug even the audit company must be responsible of its job, isn’t it so?

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