Polygon accuses Aave of monopolistic practices amid DeFi dispute

Aave accused of leveraging centralized governance, stifling innovation in Web3 landscape.

Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.

Polygon, one of the largest Ethereum layer-2 networks, has accused the DeFi lending platform Aave of adopting monopolistic practices.

This dispute arises from a proposal to allocate locked bridge funds to yield-generating strategies, which Aave opposes. Tension escalated after the lending protocol threatened to withdraw its deployment from Polygon’s network.

The controversial proposal has been rejected by the Polygon community.

‘Monopolistic tactics’

In a Dec. 17 statement, Polygon accused Aave of resorting to threats after initially supporting a similar proposal.

According to Polygon, Aave’s opposition stems from the involvement of Morpho, a competing protocol whose proposal gained traction due to promises of significant ecosystem grants. It added:

“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.”

Polygon’s founder, Sandeep Nailwal, also criticized Aave’s approach as anti-competitive and damaging to the spirit of Web3. He pointed out that Aave’s earlier proposal failed to gain traction, unlike Morpho’s, which offered significant benefits to the Polygon ecosystem.

According to him, Polygon would not be intimidated by monopolistic tactics or aggression and would continue to explore innovative mechanisms to achieve more success. He added:

“Our commitment is to a thriving, competitive, and truly decentralised DeFi ecosystem that serves the best interests of all users and builders. The Polygon community will continue to push the boundaries of what’s possible, standing resolute against any actions that undermine the principles of Web3.”

Additionally, Marc Boiron, CEO of Polygon Labs, accused Aave of leveraging fear and centralized governance to suppress competitors. He described direct messages from Aave team members as intimidation attempts to dissuade Polygon governance from supporting Morpho’s proposal.

Boiron called for greater accountability, urging the DeFi community to reject monopolistic behavior.

He added:

“Aave will seek support as they did yesterday to respond to this tweet and others to retain the control they have over lending in this industry. However, new players are emerging who will create a better web3 future.”

Aave’s response

Aave’s founder, Stani Kulechov, defended the protocol’s stance, emphasizing that the DAO acted to protect users from third-party risks.

He argued that the lending protocol’s governance process reflects its commitment to user security, rejecting claims of anti-competitive behavior as a distraction from genuine concerns.

He stated:

“The main feedback for Polygon was that Polygon users were unhappy about a network using their funds for high-risk investments without consent. The fact that Aave opened the discussion and took action to protect users is exactly what DAOs should do.”

Mentioned in this article