Aave Community Eyes Exit from Polygon Over Controversial Bridge Proposal, Polygon Team Responds

Concerns Rise as Aave Considers Withdrawal

The Aave community is navigating a pivotal moment as Aave Chan, a contributor group led by Marc Zeller, proposed withdrawing Aave’s lending services from Polygon’s PoS chain. This follows Polygon’s recent suggestion to deploy over $1 billion in bridge assets into yield-generating strategies.

As the largest decentralized app on Polygon by total value locked, Aave currently manages deposits exceeding $466 million on the PoS chain. 

However, Zeller’s proposal signals a cautious approach, aiming to shield the protocol from what he deems significant security risks tied to Polygon's ambitious bridge initiative. He outlined specific adjustments for Aave’s v2 and v3 lending markets, including setting a 0% loan-to-value for all assets and increasing the reserve factor to 85%. These measures are designed to discourage further deposits and borrowing activity while mitigating exposure to potential vulnerabilities.

The proposal stems from concerns over Polygon’s plan to redeploy stablecoin reserves, totaling $1.3 billion in assets like DAI, USDC, and USDT, for yield-generation purposes. Drafted in collaboration with DeFi protocols Morpho and Yearn, Polygon’s "pre-PIP" proposal cited a $70 million annual opportunity cost from idle reserves. 

While this initiative is still in its early stages, Zeller remains skeptical, pointing out the risks associated with rehypothecating user deposits from the bridge and investing them into liquidity pools and lending platforms. Such practices, he warned, could lead to bad debt and elevate security risks for the canonical bridge—a critical infrastructure element for Polygon.

Zeller contrasted Polygon’s approach with lower-risk strategies employed by other chains, such as ETH staking or MakerDAO’s DAI savings rate module, which avoid the pitfalls of bad debt exposure. His opposition also highlights the competitive dynamics, as Morpho, a collaborator on Polygon’s proposal, is a direct competitor to Aave in the DeFi space.

This debate has triggered discussions across the Polygon and Aave communities. Zeller’s proposal, currently at the Aave Request for Comments (ARFC) stage, could move to a snapshot vote if the response is favorable, followed by an AIP stage for final approval. Meanwhile, Polygon Labs has emphasized that its yield-generation strategy remains a preliminary idea. A spokesperson from Polygon noted that community feedback and security considerations would play a vital role in shaping the outcome.