TL;DR
- Aave Chan proposes adjustments to its services to mitigate risks associated with bridged assets on Polygon.
- Polygon is evaluating a strategy to leverage $1.3 billion in inactive stablecoins on its network.
- Security in decentralized finance remains the primary focus of both proposals.
Aave Chan, a contributing group to the decentralized lending platform, has presented a proposal aimed at reducing risks in its services on the Polygon PoS network. This initiative responds to a Polygon proposal that seeks to utilize bridged assets, such as DAI, USDC, and USDT, for yield generation strategies, which could increase exposure to security risks.
Polygon’s plan, still in its preliminary stages, considers that the $1.3 billion in currently idle stablecoins represent a significant opportunity cost, estimated at $70 million annually. However, the community has raised concerns about the potential risks of rehypothecating these bridged assets, such as increased vulnerabilities to hacks or exposure to uncollectible debts.
Aave Chan, in turn, seeks to protect user funds through a series of preventive adjustments to the risk parameters of its versions 2 and 3 deployed on Polygon. Suggested measures include setting a loan-to-value (LTV) ratio of 0% and increasing the reserve factor to 85%, discouraging new deposits.
Measures to Strengthen Security in Aave
In addition to modifying risk parameters, the proposal includes migrating governance infrastructure to a more secure L2 network. This would enhance the resilience of voting processes and strengthen community confidence. The proposal also suggests freezing certain reserves on Polygon and gradually reducing loan limits for bridged assets, thereby minimizing potential failure points.
On the other hand, Polygon Labs has clarified that its yield-generation strategy, currently under discussion, will not compromise the ecosystem’s security. The organization has invited the community to provide feedback, aiming to strike a balance between innovation and the protection of user funds.
The final decision on these proposals will rest with their respective communities. Meanwhile, attention remains focused on the need to uphold high security standards within the DeFi ecosystem, particularly in managing bridged assets, which have historically been a weak point in terms of vulnerabilities.