Aave Weighs Exit from Polygon Amid $1.3B Yield Farming Proposal

Dec 16, 2024, 01:55 PM

Aave, a prominent decentralized finance (DeFi) lending platform, is contemplating ceasing its operations on the Polygon network due to a controversial proposal by Polygon to use $1.3 billion in bridged stablecoins for yield generation through DeFi protocols like Morpho and Yearn. The proposal, known as the Polygon PoS Bridge Liquidity Program, has raised significant security concerns among Aave contributors and users, particularly regarding the stability of stablecoin holders. Aave governance delegate Marc Zeller has highlighted the risks associated with bridge hacks, citing examples like Ronin, BNB Bridge, Wormhole, and Multichain, and suggested setting the loan-to-value (LTV) for all assets on Aave V2 and V3 on Polygon to 0%, effectively halting new borrowing. This move is seen as a response to the potential vulnerabilities introduced by the yield farming plan, which could jeopardize the stability of stablecoin holders. Aave's significant presence on Polygon, accounting for over a third of the chain’s total value locked (TVL) at $467 million, underscores the potential impact of this decision on Polygon's ecosystem.