A recent staff paper from the Bank of Canada has highlighted the effectiveness of Aave V3's risk management model, which reported zero non-performing loans in 2024. According to Cointelegraph, the study attributes this success to the platform's overcollateralization and automated liquidation processes, which have been instrumental in preventing lender losses within its Ethereum lending market. The research utilized transaction-level data spanning from January 27, 2023, to May 6, 2025, revealing that positions were typically liquidated before collateral values fell below the outstanding debt, thereby containing lender losses across the sample period. However, the paper notes a tradeoff in Aave V3's model