The decentralized finance (DeFi) space has been abuzz with a recent proposal from Stani Kulechov, the founder and CEO of Avara — the parent entity for the suite of Aave companies. The proposal suggests dropping support for Polygon markets from the Aave platform, which has sparked a heated debate in the community.
The Background
The proposal to drop Polygon was put forth after an early-stage Polygon Improvement Proposal (PIP) from Allez Labs and Morpho to use stablecoins in Polygon’s proof-of-stake Portal bridge to generate yield. This proposal aimed to create a new revenue stream for the bridge, which has been holding over $1.3 billion in stablecoins.
The Safety Concerns
Kulechov expressed his concerns about the safety risks associated with this proposal. He pointed out that bridge exploits have led to some of the most catastrophic financial losses in DeFi history. As an example, he cited the $100-million Harmony Horizon bridge hack in June 2022, which had devastating consequences for users.
According to Kulechov, the proposed Polygon Improvement Proposal posed an unacceptable safety risk to Aave. He emphasized that the protocol’s security and stability must be its top priority, and any proposal that compromises this must be thoroughly scrutinized.
The Response from Aave Chain Founder Marc Zeller
Marc Zeller, the founder of the Aave chain, had previously submitted a proposal to discourage Polygon users from using Aave and eventually end support altogether. He suggested adjusting the risk parameters of loans on Aave v2 and Aave v3 on the Polygon network to make it unattractive for Polygon users to deposit funds into the lending protocol.
The Other Side of the Story: Polygon Founder Sandeep Nailwal’s Response
Polygon founder Sandeep Nailwal responded to Aave’s leadership on social media, characterizing the proposal to sever ties as "monopolistic." According to Nailwal, Aave’s leadership had submitted a similar pre-PIP to use stablecoins in the Polygon proof-of-stake bridge to generate yield. Initially, Aave was excited about providing yield-bearing opportunities for the $1.3 billion in stablecoins held in the Polygon Bridge.
Nailwal argued that the Morpho proposal, which was still generally rejected by the Polygon community, was more decentralized and featured incentives that would encourage project development in the Polygon ecosystem. These attractive selling points caused the proposal from Morpho and Allez Labs to gain traction and generate more buzz among the Polygon community than the competing proposal from the Aave leadership.
The Implications
The decision to drop support for Polygon markets has far-reaching implications for the DeFi space. It raises questions about the relationship between lending protocols and layer-2 scaling solutions, as well as the importance of decentralization in these ecosystems.
The debate surrounding this issue highlights the need for greater transparency and communication between different stakeholders in the DeFi space. As the market continues to evolve, it is essential that participants work together to create a more secure, stable, and decentralized environment for all users.
A Complex Issue with No Easy Solutions
The decision to drop support for Polygon markets is not without its challenges. It requires careful consideration of the potential consequences on both Aave and Polygon ecosystems. The proposal has sparked a heated debate in the community, with some arguing that it is necessary for the security and stability of Aave, while others see it as a monopolistic move.
Ultimately, the decision to drop support for Polygon markets will depend on various factors, including the feedback from the community, the analysis of potential risks and benefits, and the willingness of both parties to work together towards a mutually beneficial solution.
