The Aave neighborhood is contemplating a proposal to withdraw its lending companies from Polygon’s PoS chain on account of issues about safety dangers linked to bridged property.
This follows a proposal from the Polygon neighborhood to use over $1 billion in bridge property for yield era, which raised issues about potential vulnerabilities. Aave, the biggest decentralized app on Polygon with over $466 million in deposits, is fearful that these modifications would enhance the danger to customers.
Marc Zeller, the founding father of Aave Chan, authored the proposal to regulate threat parameters for Aave’s Model 2 and Model 3 protocols on the Polygon community.
He needs to guard the protocol from future safety points, citing previous incidents the place bridge vulnerabilities led to main losses within the DeFi ecosystem, such because the Ronin, BNB “Bridge,” Nomas, Multichain, Concord, and Wormhole hacks.
Zeller mentioned, “The changes are in response to an upcoming proposal that can considerably influence the danger profiles of bridged property throughout the Polygon community.”
The proposal suggests making important changes to scale back safety dangers and encourage migration from the Polygon community. It consists of setting the loan-to-value (LTV) for all property on Aave V2 and V3 on Polygon to 0%, making borrowing unimaginable.
The reserve can be raised to 85%, discouraging deposits and selling migration. Aave additionally plans to take away help for Aave V3 Polygon within the Security Module and cancel the umbrella deployment on Polygon.
Moreover, the proposal recommends migrating Aave Governance V3 voting to a safer Layer 2 community, freezing reserves for key property like USDC.e, USDT, wETH, wstETH, DAI, wBTC, AAVE, LINK, GHST, EURS, and StMATIC, regularly decreasing LTV for bridged property. These modifications purpose to reinforce safety and incentivize customers to maneuver away from Polygon.
Final week, Allez Labs, in collaboration with DeFi protocols Morpho and Yearn, proposed a plan to deploy round $1.3 billion in stablecoin reserves from the Polygon PoS bridge into lending protocols to generate yield. The proposal highlighted that the idle reserves are inflicting a possibility price of about $70 million yearly. Nonetheless, the Polygon neighborhood has but to vote on the proposal.
Zeller cites issues concerning the safety dangers of utilizing funds from the canonical bridge. He warned that rehypothecation of consumer deposits in liquidity swimming pools might expose them to dangerous debt and important dangers, not like safer methods employed by different chains, similar to liquid staking, or MakerDAO’s financial savings charge.
Whereas the Polygon proposal continues to be within the early dialogue stage, Polygon Labs has emphasised that safety shall be a precedence because it strikes ahead with any yield-generation methods.
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