Aave Halts Polygon Lending Amid USDT Yield Farming Concerns

Aave, a leading decentralized finance (DeFi) platform, has voted to halt lending and borrowing services on the Polygon PoS chain, following a controversial proposal by Polygon to use over 1 billion USDT for yield farming. The decision, which was overwhelmingly supported by the Aave community, comes as a response to concerns over the risks associated with Polygon's yield farming method.

Aave founder Marc Zeller proposed strict risk parameters to prevent further deposits or loans on the Polygon PoS chain. He believes that Polygon's yield farming method is too risky and could lead to default issues. Aave is the largest decentralized application on Polygon, with a total value locked (TVL) of over $300 million. The decision to halt lending and borrowing services on the Polygon PoS chain could result in a significant loss of TVL for Polygon.

Polygon Labs CEO Marc Boiron has stated that the ideal outcome would be for Aave to abandon the termination plan. However, the Aave decentralized autonomous organization (DAO) has passed a related proposal to adjust the stablecoin loan-to-value (LTV) ratio to 0%, preventing users from borrowing. As of now, over 690,000 votes support leaving Polygon, with approximately 117,000 votes in opposition.