The Polygon community has pushed back on a proposal to allocate $1.3 billion in stablecoins from its Proof of Stake (PoS) bridge to yield-generating programs on Morpho, a DeFi platform built on Ethereum.
The decision was shared on Dec. 17 via MATIC’s official social media, citing user concerns about the absence of a consent mechanism and the potential risks involved. In a statement, Polygon acknowledged the feedback, saying:
“Given the community’s concern around the pre-PIP, it seems unlikely for this proposal to progress. However, it doesn’t mean innovative or even aggressive ideas shouldn’t be explored in the future.”
The move reflects the community’s cautious approach to balancing innovation with network security.
A new proposal aims to put stablecoin reserves in the MATIC PoS bridge to work, using them to boost liquidity and grow the platform’s DeFi ecosystem. Called a preliminary proposal (pre-PIP), it suggests deploying these idle funds into Morpho’s liquidity pools, which could potentially generate $70 million annually.
Polygon Gets Support from Allez Labs and Others
The plan has support from Allez Labs, Morpho Association, and Yearn. However, it’s not without controversy. Critics warn of significant risks to MATIC stability. Former MATIC employee Pranav Maheshwari raised concerns about the dangers of placing bridge assets into high-risk protocols.
He pointed out that vulnerabilities like hacks or financial instability could threaten the assets secured by Polygon’s bridge, sparking debate over whether the potential rewards outweigh the risks.
The proposal sparked a clash with Aave, a major player in Polygon’s ecosystem. Marc Zeller, founder of the Aave-Chan Initiative, pushed back with a counter-proposal. He argued that Aave should exit Polygon, citing security concerns linked to the initiative. Zeller also warned that moving funds into Morpho could end up helping Aave’s competitors.
Polygon Labs didn’t hold back in its response. They expressed disappointment and pointed out that Aave had once suggested a similar strategy to deploy stablecoin reserves into yield-generating projects. They also accused Aave of behaving in a way that stifles competition.
In the end, the community chose to reject the proposal, prioritizing security and trust over chasing higher yields. While the plan is now off the table, MATIC recognized the need for innovative ideas to manage its large stablecoin reserves.
For now, MATIC PoS bridge remains one of the largest holders of on-chain stablecoins. This opens up both opportunities and challenges for future governance decisions.
Polygon Accuses Aave of Monopolistic Practices
Polygon, a major Ethereum layer-2 network, has accused DeFi lending platform Aave of using monopolistic tactics. The dispute centres on a proposal to use locked bridge funds for yield-generating strategies, an idea Aave strongly opposes.
Tensions grew when Aave threatened to pull its deployment from Polygon’s network if the proposal moved forward. Despite the standoff, the Polygon community rejected the controversial proposal.
In a statement on December 17, Polygon criticized Aave’s approach, calling out the use of threats against governance participants. They claimed Aave’s opposition was influenced by Morpho, a competing protocol, which gained favour by offering large ecosystem grants.
MATIC emphasized the need for open discussions in governance, stating, “Progress comes from constructive debate, not shutting doors on fresh ideas.”
Stay connected with TurkishNY Radio by following us on Twitter and LinkedIn, and join our Telegram channel for more news.
FAQs
How much is 1 MATIC in USD?
Right now, 1 MATIC is priced at $0.593407 in USD. The market cap is sitting at $1.15 billion, with a 24-hour trading volume of $8.63 million. Prices update in real-time to reflect market changes.
Is Polygon a blockchain?
Yes, Polygon is a smart contract platform and a layer 2 scaling solution. It works alongside Ethereum, providing faster and more cost-effective transactions while using Ethereum for security and finality.
