Aave V4 proposal suggests DAO funds as primary buffer for lending losses

A proposal from TokenLogic dated Sept. 11 introduces the Umbrella plan for Aave V4, aiming to protect lenders of WETH, USDC, and USDT on the Core liquidity Hub. Under this framework, the Aave DAO would be the first to absorb bad debt through deficit offsets, followed by volunteer underwriters. The plan sets specific underwriting targets for each asset and limits coverage to the designated reserve pools, with participants receiving additional rewards for assuming loss risks.