Disputes Over Stablecoin Reserves Proposal May Force Aave DAO to Reconsider Its Relationship with Polygon

Aave DAO is considering leaving Polygon due to disagreements over the proposal to utilize stablecoin reserves for yield farming activities on other DeFi platforms.

According to Marc Zeller, the founder of the Aave chain, the proposed change would significantly impact the risk profiles of bridged assets within the scaling layer. Furthermore, it could potentially spill over to Aave V2 and V3 on Polygon, which could be detrimental to the stability of the Aave ecosystem.

In a recent announcement, Zeller expressed his concerns about the risks associated with this proposal. He suggested adjusting the “risk parameters” for the Polygon-powered Aave instances in order to incentivize migration away from the scaling layer. This would involve reducing the loan-to-value (LTV) ratio for all assets on Polygon-based Aave implementation to 0%, effectively deactivating the option to use bridged assets and redirecting users to other Aave instances.

Additionally, Zeller proposed freezing “reserves on Aave V3 Polygon” and migrating “Aave Governance V3 voting infrastructure to another L2 network.” These suggestions are currently in their infancy stage and require feedback from all stakeholders before moving forward.

This decision comes just a week after Sports Illustrated migrated its NFT ticketing platform from Polygon to Avalanche, a layer one blockchain. If Aave follows suit and leaves Polygon, it’s uncertain whether other DeFi protocols will also disapprove of the proposal or follow in their footsteps.

In related news, Polygon is still collecting community feedback before presenting the proposal for voting. The outcome remains unclear at this time.

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Source: fullycrypto.com