The development representative wants to withdraw Aave V3 from Fantom, but the reasons for the proposal are untenable?
On August 2, Marc Zeller, the development director of Aave, released a new proposal on the Aave forum: it is recommended to freeze the Fantom market assets of Aave V3. At that time, users can repay debts and withdraw assets, but cannot deposit and borrow in this market.
In January of this year, the Fantom Foundation launched a vote for Aave V3 deployment on Snapshot, and passed with a support rate of 99.98%. At that time, the proposal claimed that Aave could participate in Fantom's incentive plan and get up to 6 million FTM rewards per month from it. However, only half a year after the deployment of Aave V3 to Fantom, Aave V3 will be withdrawn from Fantom. What happened?
According to Marc Zeller in the proposal, there are two main reasons:
The Aave V3 Fantom market didn't offer Aave a decent yield. With only $2.4 million in open borrowing positions in the current market, the protocol generates an average of only $300 in fees per day.
Worried about the risk of cross-chain bridge being stolen. Because Fantom relies on the Multichain bridge, and this market is currently not supported by the Aave security module. Combined with the recent frequent theft of cross-chain bridges, Aave users could be at risk of losing millions of dollars.
Marc Zeller also specifically mentioned that this content expression does not negate Multichain, but only considers the risks of events that have occurred, and believes that this is worthy of careful consideration.
From the content of the proposal alone, the core point is that the risk is not directly proportional to the return. Activity on the Fantom marketplace was much lower than expected. According to defillama data, Fantom’s TVL in aave v3 is 6.55 million US dollars, ranking 5th among the six chains. The 6th is Harmony, which has experienced a hacker attack some time ago, compared with Arbitrum, which ranks 4th with 30 million US dollars. It is also very different, which may be due to the fact that the Fantom Foundation has not recently adopted relevant incentives to attract liquidity into the market.
But for this aspect, should the Aave community focus on how to help Fantom gain access to more projects, and hold various incentive activities to allow more assets to enter Aave V3, so as to stimulate users' usage frequency and interest, And then increase the income of the chain. This does not seem to be a difficult problem to solve, and "low returns" cannot be the main reason for abandoning the Fantom market and freezing its assets.
Second, the cross-bridge risk mentioned in the proposal is also controversial. According to the official website of Multichain, Multichain supports more than 50 projects, including the other 5 public chains deployed by Aave V3. Therefore, if there is concern that Fantom will encounter the risk of being stolen because of Multichain, then this risk also exists on the other 5 chains.
Moreover, some community members said that Abritrum, as a new and complex system, is vulnerable to multi-signature vulnerabilities, such as what happened in Harmony Bridge. The risk level seems to be higher than that of Fantom. If Fantom is based on the "potential risk-to-reward ratio, shouldn't Arbritrum be the same?
In this regard, Simone Pomposit, Fantom's chief marketing officer, also said: "The framework of the Aave governance proposal is to prevent potential bridging problems; however, the actual reason behind the proposal seems to be that Aave has not gained enough market share on the Fantom network to justify the risk. Reasonable. Proposals are justified in stating that the revenue decline is due to a flawed business model, but it is unfair to attribute it to assumptions related to cross-chain bridges.”
Currently, the proposal is not yet open for voting and will be voted on 5 days after the proposal is published. If passed, Aave Guardian will freeze all reserve assets deployed by Aave V3 on Fantom, while still allowing users to repay debt, liquidate, withdraw, and change interest rates. Freezing reserves will not interfere with direct transfers to any aToken contract.
Aave V3's proposal to withdraw the DeFi protocol from L1 does not seem to be well thought out. In addition to the two points in the proposal being untenable, closing the Fantom market will also destroy the multi-chain system that AAVE is trying to build with the V3 proposal.
In addition, with the emergence of more and more new public chains, side chains, and Layer 2, Aave, which is based on Ethereum and took the lead in opening multi-chain lending business, seems to be more cautious in the future deployment of multi-chains, and Aave should also formulate More stringent and detailed deployment standards and solutions to ensure that such concerns can be quickly remedied when they first emerge.
