Behind the quarrel between Polygon and Aave: only competition but no symbiosis?

Written by Yangz, Techub News

Recently, Marc Zeller, founder of the Aave Chan Initiative (ACI), initiated a community proposal to adjust the risk parameters of Aave V2 and V3 on Polygon, and explicitly "encourage migration from Polygon". As the application with the highest TVL on Polygon (DeFillama data shows that at the time of writing, Polygon's total TVL was approximately US$1.21 billion, of which approximately US$450 million was provided by Aave), Aave's move immediately attracted industry attention and also triggered a verbal dispute between the Polygon team and the Aave team.

Polygon co-founder Sandeep Nailwal accused Aave's leadership of "sour grapes", saying that "this behavior is extremely monopolistic and anti-competitive, and is not in the spirit of Web3." Aave founder Stani Kulechov responded that Polygon's behavior was actually "the evildoer complained first", and quickly spread rumors and "blamed" Aave's leadership in the face of widespread user opposition.

So, what is the root cause of this sudden quarrel? The reason is that it all stems from a Pre-PIP improvement proposal released by the Polygon community.

On December 12, Allez Labs worked with DeFi protocols Morpho and Yearn to draft the proposal. The proposal states that there are currently about $1.3 billion in stablecoin reserves (DAI, USDC and USDT) on the Polygon PoS cross-chain bridge that are idle, which is equivalent to about $70 million in annual revenue being wasted at the current benchmark lending rate. Therefore, the three parties proposed to deploy these stablecoin reserves into lending protocols with various yield strategies and launch a new ecological incentive program to expand the DeFi ecosystem of Polygon PoS and AggLayer.

Specifically, the proposal proposes to exchange DAI for Maker's sUSDS and deposit USDC and USDT in Morpho Vaults to earn revenue. In addition, Allez Labs will act as a risk manager to conduct risk analysis on other possible subsequent Morpho Vaults. Yearn will serve as the manager of the ecosystem incentive program, creating a Polygon ecosystem Yearn Vault for each approved asset, and using the proceeds from the Morpho market and sUSDS strategy to reward the depositors of these Vaults.

At first glance, there seems to be nothing wrong with this proposal. But in the eyes of Aave's leadership, there are "huge risks" hidden under the proposal. On the surface, as reflected in the various examples cited by Marc Zeller of cross-chain bridge vulnerabilities that have caused losses to the DeFi ecosystem, this proposal poses a financial security risk to Aave. Secondly, as you can see, the initiators of the proposal are the three main beneficiaries of the proposal. As the number one application in the Polygon ecosystem by TVL, Aave may feel "ignored" or "betrayed."

In addition, Stani Kulechov pointed out in his response that this proposal was actually the result of "secret communication" between Polygon and the above three parties, and it was reported that Polygon completed a huge token transaction as a result. Stani Kulechov said that Polygon users expressed dissatisfaction with the proposal from the beginning, and the Polygon leadership only "hypocritically" said today that they did not support the proposal, but were just "making up excuses." In order to protect the security of user assets, Aave DAO proposed the proposal to "exit Polygon."

However, this proposal for "protecting user safety" is "sour grapes" in the eyes of Polygon. In response to this matter, Polygon co-founder Sandeep Nailwal stated that when the plan was first submitted for discussion, Aave leadership had lobbied hard to ensure that cross-chain funds were used for deployment on Aave. During the public request for proposals on the Polygon governance portal, Aave leadership also held several meetings and invited Polygon Labs leadership to various dinners and presentations to win the support of Polygon Labs and "select Aave" as a stakeholder in the cross-chain process. In addition, Aave also released relevant proposals, but it did not arouse widespread discussion in the Polygon community. In contrast, Morpho (Aave's main competitor)'s proposal received more support from community members. Nailwal said Aave "ignores the security measures that are in place, which is more like 'sour grapes'. Ironically, this move will harm the users it claims to protect and undermine their access to a stable and prosperous DeFi ecosystem. It is hypocritical to claim to care about user security while trying to destabilize the ecosystem that so many users rely on." In addition to the discussion on security, the two sides' quarrel has also risen to attacks on their respective forms of governance. Polygon Labs CEO Marc Boiron pointed out that Aave and its surrounding teams are "monopolistic enterprises" and use dirty tricks to create fear. Boiron said that Marc Zeller sent him a private message yesterday, "trying to intimidate" that Aave DAO will definitely pass the "exit Polygon" proposal. Stani Kulechov said that Aave DAO only initiated discussions and took action to protect users. "It is inaccurate to characterize Aave DAO's proposal as anti-competitive behavior, and it diverts people's attention from the real problem, which is user safety." Stani Kulechov said, "Aave supports immutable governance. Aave even allows the use of the project's own tokens for governance under a friendly fork policy. (On the contrary) If Polygon wants to have more control over cross-chain asset investment strategies, they can launch a tailor-made market." At present, it seems that the proposal initiated by Allez Labs, Morpho and Yearn is unlikely to pass, and it is unknown whether Aave will really withdraw from the Polygon ecosystem (Note, Lido has announced that it will gradually shut down its staking service on Polygon). Although this dispute will soon be over, the issues behind it are worth pondering. Regardless of whether there are false statements from both parties, from Aave's risk prevention to Polygon's ecological expansion, both parties are striving for the best interests of themselves and their users. So, in this industry where interests are paramount, can we only see competition but not symbiosis?