Aave V3.8 Proposal Preserves Flash-Loan Liquidations

Aave Labs' proposed V3.8 security upgrade will preserve flash-loan liquidations. The proposal, posted on October 21, introduces a guard to Pool operations that prevents external callbacks from re-entering protected contract functions before earlier calls finish. However, flashLoan() and flashLoanSimple() will be excluded, allowing their callbacks to continue invoking Pool actions, including liquidations. A smart contract receiving a flash loan requires time within the transaction to utilize borrowed assets, and the proposed guard's design must accommodate transaction patterns that integrations depend on. The implementation will use transient storage from Ethereum's EIP-1153 to track protected operations without incurring high costs. Aave's path forward includes governance approval, security audits, and feedback from reviewers like Certora. The final implementation must ensure compatibility while maintaining the intended transaction sequence.

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