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AAVE: Polygon proposal is too risky, evaluate its exit
By Daniele Corno
There are those on the AAVE Team who speak out against Polygon's proposal: Too risky for safety, evaluate exit from Polygon
Aave evaluates exit from Polygon: too many risks
The Aave community is considering a proposal put forward by Marc Zeller, founder of Aave Chan, to phase out lending services on the Polygon PoS network .
The initiative comes as a response to Polygon’s proposal to use more than $1.3 billion in stablecoins in the Polygon Pos Bridge, such as USDC, USDT and DAI, to generate returns.
According to Zeller, this move introduces significant security risks. He pointed out that bridge vulnerabilities and bad debts could compromise users’ deposits.
Aave is currently the leading DAPP on Polygon, with $466 million in total blocked value (TVL), representing 30 percent of the entire network. Its position is critical within Polygon and this proposal, could challenge the approval of the above proposal.
Polygon and stablecoin: Aave's response to the proposal
Polygon justified its proposal by highlighting an opportunity cost of between $70 and $90 million through stablecoin deposits.
In the proposal, Polygon intends to distribute these resources in variousDeFi protocols , such as Yearn and Morpho, to generate returns. However, Zeller expressed concerns. He pointed out that these strategies are much riskier than more secure methods adopted by other blockchains.
To mitigate the risks, Zeller proposes to increase the loan-to-value to 0 percent, which is the value that against one’s deposit one can borrow, and to increasethe reserve factor to85 percent, which is the capital that Aave retains to protect itself in case of losses.
Operation polygon(e) pic.twitter.com/soiN4vBwZ2
— Marc “Billy” Zeller 👻 🦇🔊 (@lemiscate) December 16, 2024
It should be specified that at the present time, neither proposal is on the ballot, they are both at an early stage of evaluation and discussion.
