- Aave proposes to freeze bridged belongings on Polygon to restrict dangers.
- Polygon’s board opposes Aave’s proposal, citing anti-competitive considerations.
The Aave neighborhood is debating whether or not to stop operations on Polygon, following considerations concerning the threat profile of bridged belongings. This follows a December 13 proposal from Aave Chain founder Marc Zeller to revise the danger parameters for Aave v2 and v3 on Polygon.
Zeller’s proposal was prompted by Polygon’s board discussing a plan to deploy greater than $1 billion in stablecoin reserves on protocols like Morpho and Yearn to generate income. The proposed changes embody setting Mortgage-to-Worth (LTV) ratios at 0%, freezing sure reserves and rising reserve elements. By setting the LTV to 0%, customers can’t borrow in opposition to bridged belongings, mitigating the dangers related to potential bridge vulnerabilities akin to these seen within the Concord and Multichain bridge exploits.
Below Zeller’s plan, interactions with a number of bridged tokens – together with USD Coin Bridged (USDC.e), Wrapped Ether (wETH) and Wrapped Bitcoin (WBTC) – could be frozen, lowering publicity to those belongings. Whereas the Polygon implementation of Aave is at the moment locking in $461 million in complete worth (TVL), cumulative reimbursement technology has reached $122 million, in line with DefiLlama.
“Aave’s management just isn’t a part of the Web3 ethos”
In an announcement, Polygon Labs mentioned the proposal is open to suggestions, emphasizing their assist for ecosystem security. “The Polygon neighborhood values open dialogue and collaboration. We encourage discussions to totally consider these proposals,” a spokesperson mentioned. Neighborhood members strongly opposed Polygon’s preliminary proposal, citing elevated dangers for stablecoin holders.
In the meantime, Sandeep Nailwal, co-founder of Polygon, echoed these considerations. He described the shortage of an opt-in mechanism within the Pre-PIP as problematic and confirmed the possible rejection of the proposal as a result of widespread neighborhood disapproval. Regardless of this, Nailwal praised the governance course of for its energetic debate and collaboration.
Nevertheless, Aave’s response provoked criticism. Zeller’s ‘Operation Polygon(e)’ proposal, seen as a retaliation in opposition to Morpho’s competing initiative, was labeled monopolistic. Nailwal accused Aave’s management of participating in “anti-competitive conduct” to stifle innovation.
“The Polygon neighborhood won’t be intimidated and stays dedicated to fostering a decentralized, aggressive DeFi ecosystem,” mentioned Nailwal. Either side proceed to advocate for joint options as discussions evolve.