The potential implementation of a “bold” initiative on Polygon to generate returns through immobilized stablecoins has divided the Aave Decentralized Autonomous Organization (DAO) in recent days. To the point that the protocol is seriously considering separating from the blockchain.
A simple proposal at the origin of tensions between Polygon and Aave
The decentralized finance protocol (DeFi) Aave may be living its last days alongside the Polygon blockchain. Indeed, at least 2 major members of Aave's decentralized autonomous organization (DAO) would be inclined to speak out in favor of this separation in a vote expected to take place early next year.
🤔 Everything you need to know about Aave, (AAVE), the cryptocurrency lending and borrowing protocol
It all started in December when Allez Labs offered to use $1.3 billion in stablecoins DAI, USDC and USDT immobilized in the Polygon PoS bridge in order to deploy it in DeFi protocols such as Morpho, Aave or even Yearn.
The goal would be to generate an estimated return of $70 million per year. This money would then be used to drive the growth of the blockchain and its ecosystem. Certainly, the amount is not negligible for Polygon. However, part of the Aave DAO has criticized the initiative, fearing that this strategy does not expose the funds of protocol users to excessive risks.
Morpho had stated to Cryptoast having only evaluated the technical aspect of the question, taking no position regarding this initiative. For his part, Marc Zellerfounder of the Aave Chan Initiative (ACI) and member of the Aave DAO, was skepticalpointing out the increased risks of hacking and poor risk management that can lead to considerable losses for Aave users.
Therefore, he published a proposal purely and simply to expel Polygone d’Aave by setting the loan-to-value (LTV) ratio to 0% for all assets originating from that blockchain on the protocol.
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A vote will soon be organized to decide whether or not to decide on the separation
According to Marc Zeller to our colleagues at DL News, his proposal was to be studied in January. Another member of Aave's DAO known by the pseudonym EzR3aL said that he would support this measure. The two parties claim that at present, they would have enough votes in order to proceed with the split between Aave and Polygon.
Furthermore, Marc Zeller explained that the blockchain did not represent only 1.5% of revenue generated by Aave's DAO. “ In what world do we risk paying a billion dollars in bad debt for this? » he added. One member of the crypto community went even further, saying that conversely, the protocol accounted for 38% of the network's total value locked (TVL).
And AAVE is 38% of Polygon's TVL.
— Zac Cheah (@Zac_Pundi) December 17, 2024
👉 Polygon, the blockchain that wants to democratize Web 3 to the general public
Polygon Labs, the entity behind the blockchain, defended himself against these criticisms. She affirmed that this initiative was still at a preliminary stage and that a dialogue between the different stakeholders was essential to find an adequate solution.
However, the reaction from part of Aave's DAO was not well received by Polygon Labs. The latter considered it disappointing that the idea of separating the protocol from the blockchain could be so quickly raised.
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Surprised by the rise of crypto-assets at the end of the 2010s, I began to closely follow this sector which fascinates me to the greatest extent. When I'm not in football stadiums, rugby stadiums or handball halls, I work on writing relevant articles around cryptocurrencies and more broadly, Web3.
Zacharie Tazrout
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