Polygon warns of threats to decentralization in ongoing dispute with Aave

Ethereum sidechain Polygon has accused Aave of using anti-competitive tactics to muscle out competing DeFi protocols. This is a reaction to the proposal on Aave DAO about whether the leading DeFi protocol should exit the Polygon network.

According to a post on Polygon’s official X account, the plan to use bridge funds for yield farming, which led to the current conflict, was simply a pre-PIP to gauge community sentiment. Therefore, the community’s pushback is a good sign of the community’s engagement and decentralized governance.

However, Polygon criticized Aave leadership’s reaction to the plan, noting that it was an intimidation tactic and that its community should resist such attempts.

It said:

“Whether you support or oppose the Pre-PIP, no one should fear retaliation for proposing ideas or engaging in formal governance processes. Progress comes from constructive debate, not shutting doors on those who bring fresh perspectives.”

Nevertheless, the network, which has around 40% of its total value locked on Aave, said it remains committed to a thriving, competitive, and truly decentralized DeFi ecosystem and looks forward to a constructive dialogue with Aave.

Polygon co-founder accuses Aave of hypocrisy 

Criticisms of Aave also came from Polygon’s co-founder Saideep Nailwal, who claimed on X  that Aave itself proposed a similar plan before now. According to him, the DeFi protocol is only pushing back after it became clear that it may not be the choice protocol.

He said:

“When this pre-proposal was first brought into discussion, Aave leadership was super excited about it and lobbied heavily to make sure the bridge funds go to Aave deployment.”

The founder added that Morpho Labs’ proposal offered more benefits for the Polygon ecosystem while giving the community more control over smart contracts. This is why it got more traction, causing Aave to “threaten” decoupling from the network.

He described the Aave proposal to discontinue its operations on the Ethereum sidechain as an attack on the network and a vicious threat that does not positively contribute to the dialogue.

Nailwal said:

“A vicious threat proposing to discontinue Aave deployment on Polygon PoS bringing huge hassle to their users, just to make sure that the biggest and fastest-rising competitor to Aave –  Morpho —  didn’t get the growth boost from STB.”

He added that the move would harm the users that the Aave DAO was trying to protect, as it would disrupt their access to the DeFi ecosystem. The co-founder noted that the attack was personal, citing that an unnamed Aave leader tweeted “Operation Polygon(e).”

Aave CEO pushes back on claims 

Meanwhile, Aave’s CEO Stani Kulechov has refuted claims by the Polygon team, noting that Aave’s decision was the right approach to managing risk as expected of a decentralized autonomous organization (DAO).

According to Kulechov, Aave’s proposal was a proactive step to protect users who already opposed the plan.

He said:

“Framing Aave DAO’s proposal as anticompetitive behavior is inaccurate and diverts attention from the real issue: user security. Inheriting the risk of a third-party protocol without the consent of the DAO is not something the Aave DAO is interested in.”

Kulechov further said that the Polygon team made inaccurate claims about Aave’s infrastructure. According to him, Aave’s infrastructure can support teams that want to create custom markets with features such as immutable governance and using their tokens for governance.

Thus, Polygon could have used this if it wanted more control over its investment strategy. In his view, Polygon chose others as partners behind closed doors because of likely benefits, including a rumored token deal. He also clarified that its initial proposal to the Polygon community was different, and the sole reason it opposed the idea was because the majority of the community was against their funds being rehypothecated without their consent.

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