Aave DAO Considers Departing Polygon After Bridge Proposal

Aave founder Marc Zeller has proposed new risk parameters on Polygon in response to plans to farm over $1,215,716,77971 billion in stablecoin reserves.

The Aave community is deliberating on the possibility of shutting down operations on Polygon, citing concerns over the impending review of the risk profile of assets transferred on the network.

A Dec. 13 proposal initiated by Aave Chain founder Marc Zeller seeks to review the risk parameters of Aave v2 and Aave v3 instances on the Polygon network.

According to Zeller, the move is in response to a Polygon governance proposal that calls for using over $1,215,716,77971 billion in stablecoin reserves to farm on other protocols, such as Morpho and Yearn.

The proposal includes a number of significant adjustments to risk parameters, such as setting the loan-to-value (LTV) ratio to 0%, increasing Reserve Factors, and freezing certain reserves in Aave’s v2 and v3 implementations.

The LTV (loan-to-value) ratio determines how much a user can borrow based on their collateral. By setting the LTV to 0%, users will no longer be able to use transferred assets as collateral to borrow funds, thereby reducing the risk of cascading liquidations in the event of a bridge vulnerability.

Meanwhile, the asset freeze would prevent users from interacting with several transferred tokens, including USD Coin Bridged (USDC.e), wrapped Ether (wETH), wrapped Staked Ether (wstETH), wrapped Bitcoin (wBTC), Aave (AAVE), Chainlink (LINK), Aavegotchi (GHST), Lido Staked Matic (StMATIC), and the Tether and USDT stablecoins.

Aave is one of the largest lending protocols on the Polygon network. According to data from DefiLlama, Aave users have $12,157,167797461 million in total value locked on Polygon.

On the other hand, the cumulative fees generated on Polygon for the Aave Chain amount to $12,157,167797122 million at the time of writing.

Fonte:Cointelegraph