Proposal to Withdraw Aave from Polygon
The Aave community is currently considering a proposal to remove the lending protocol from Polygon’s Proof-of-Stake (PoS) chain. The proposal, put forth by Marc Zeller, founder of Aave Chan, highlights potential risks associated with Polygon’s plans to rehypothecate its stablecoin reserves. Zeller suggests that Aave should adjust risk parameters for its V2 and V3 deployments on the Ethereum layer-2 blockchain and eventually exit the network entirely to safeguard against vulnerabilities and long-term security threats.
Impact on Aave and Polygon
As Polygon’s largest decentralized application (dApp), Aave accounts for $468 million—approximately 40% of the Ethereum layer-2 network’s $1.3 billion total value locked (TVL). The proposed withdrawal would only affect 2% of Aave’s overall TVL and 1.5% of its fee revenue.
Reasons Behind Aave’s Consideration to Withdraw from Polygon
The decision to evaluate a withdrawal from Polygon stems from concerns surrounding a controversial yield generation proposal on the network. The proposal involved deploying stablecoin reserves into curated liquidity pools, potentially yielding up to $70 million in returns while introducing new ecosystem incentives. However, Zeller has highlighted significant risks associated with this approach, citing past bridge-related security breaches. He criticized the proposal as riskier than alternatives like Ethereum liquid staking or MakerDAO’s DAI savings module.
Community Response
The crypto community has largely supported Aave’s cautious approach to protecting user funds. Adam Cochran emphasized the risks posed by bridges and criticized the introduction of staking mechanisms for chain profits. Legal analyst Gabriel Shapiro commended Aave’s response, noting the influence of decentralized apps in governance decisions. He believed that Aave’s firm stance could discourage Polygon’s yield proposal and promote responsible practices in DeFi.
