Polygon Could Lose Over $300 Million In TVL As Aave Votes To End On-chain PoS Lending

Polygon is on the verge of losing over $300 million in total value locked as the community that runs Aave, a popular liquidity protocol, has apparently voted overwhelmingly to effectively halt lending on the PoS chain. Aave is the largest dApp on Polygon by total value locked (TVL), with deposits exceeding $300 million on the PoS chain, according to DefiLlama.

The Aave community’s approval of the proposal to end Polygon’s on-chain lending services was primarily driven by the backlash against Polygon’s December proposal to use over $1 billion in bridged stablecoins to generate yield. In response to Polygon weighing this option, Aave founder Marc ZELLER has come up with a proposal calling for the protocol to impose strict risk parameters on Aave v2 and v3 deployed in Polygon PoS to discourage further deposits and prevent users from borrowing against collateral.

Zeller argues that Polygon’s approach to generating revenue is significantly riskier than methods used by other networks, such as depositing ETH in liquid staking protocols or DAI in MakerDAO’s savings rate module, since these revenues are not subject to bad debt.

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