The dispute between Aave and Polygon over a proposal to generate $1 billion in revenue has not yet reached a conclusion, leading to the risk of Aave leaving Polygon and impacting both projects.
Aave still wants to leave Polygon despite canceling the controversial $1 billion stablecoin revenue proposal
Key Aave DAO representatives support leaving Polygon
Aave, the largest lending protocol in DeFi, is said to be leaving the Polygon blockchain after the two sides engaged in a heated debate over a proposal to generate revenue from $1 billion in idle crypto on the PoS Chain bridge.
Marc Zeller, the person behind Aave Chan, is the initiator of the proposal to withdraw from Polygon. He believes this is a way to minimize the risks from Polygon's controversial plan. This proposal also received the support of EzR3aL, another Aave DAO representative. Both hold significant voting power in the DAO, capable of deciding the outcome.
A preliminary online vote to make this decision is expected to be held next month.
The dispute revolves around the $1 billion proposal
As Coin68 reported, Polygon expressed "disappointment" with the Aave leadership team's proposal to withdraw from the blockchain. At the same time, Polygon leaders accused Aave of abusing its dominant position to suppress the competitor Morpho and considered this an unhealthy competitive behavior.
However, key Aave members affirmed that their actions were only aimed at protecting users from potential security risks when transferring assets through the bridge, similar to previous hacks such as the Ronin and BNB Bridge attacks. Aave even criticized Polygon's actions as riskier than alternative options like liquid staking on Ethereum or the DAI Saving Rate (DSR) product of MakerDAO.
Stani Kulechov, the founder of Aave, also criticized the proposal for lacking adequate risk protection measures, while emphasizing Aave's role in the Polygon ecosystem. Kulechov stated that Aave's infrastructure could support a custom market dedicated to Polygon if it wanted to have more control over its investment strategy.
The proposal also sparked outrage on social media. Some see Zeller's reaction as an effort to undermine Morpho, as well as Aave Chan's "double standards".
I like and respect @lemiscate a lot, but this seems like it's in reaction to @MorphoLabs useage. I don't see Aave trying to close up shop on Gnosis, which also utilizes bridge assets. Feels like a double standard https://t.co/X6RT8dEXA3
— PaperImperium (@ImperiumPaper) December 16, 2024
However, many others see this as a reasonable reaction to a risky proposal involving a large amount of user assets.
investing bridge funds is literally one of the worst ideas i have ever heard, especially for a general purpose chain
— DCinvestor (@iamDCinvestor) December 16, 2024
horrific even
Andre Cronje, a renowned DeFi developer, likened it to a "fractional reserve banking" - going against the core principles of DeFi. He sided with Aave, arguing that Polygon has no right to use user-deposited assets in the bridge to generate profits.
The executives of the stablecoin issuers Tether and Circle have also expressed opposition to this proposal.
Bridges should not take counterparty risk https://t.co/335bVu7M5B
— Paolo Ardoino 🤖🍐 (@paoloardoino) December 17, 2024
An uncertain future between Aave and Polygon
The dispute has attracted the attention of the entire DeFi ecosystem. While Polygon believes this is an opportunity to improve its governance system, Aave emphasizes that the top priority is to protect users.
Although many members of the Aave DAO disagree with the decision to withdraw from Polygon, Zeller and EzR3aL remain steadfast in their decision, seeing it as a necessary measure to ensure the safety of Aave's ecosystem.
Polygon CEO Marc Boiron expressed concern:
"A world without Aave is not something I want to see".
In reality, if Aave withdraws from Polygon, the consequences will be severe for both sides. Currently, the total value locked (TVL) across the entire Polygon network is $881 million, of which Aave's TVL on Polygon alone is $423 million - equivalent to nearly 50% of Polygon's TVL.
Notably, most of Aave's key governance functions are deployed on Polygon. Therefore, the departure of this leading DeFi lending protocol could cause significant losses for the Polygon blockchain.
Aave's total value locked on the Polygon network. Image: DefiLlama as of 26/12/2024
Compiled by Coin68
