Polygon's community has objected to a proposal to deploy $1.3 billion worth of stablecoins from its Proof-of-Stake (PoS) bridge in plans to generate returns on Morpho, an Ethereum-based DeFi platform.
The announcement, released on December 17 via Polygon's official social media account, highlighted concerns raised by users about the lack of a consent mechanism and potential risks to the network.
Polygon said:
Given the community's concern about pre-PIP, it is unlikely that this proposal will progress. “However, this does not mean that innovative or even aggressive ideas should not be explored in the future.”
Security and ecosystem risks
Known as an initial offering (pre-PIP), the offering seeks to leverage the stablecoin reserves currently held on Polygon's PoS bridge to drive liquidity and growth in the platform's DeFi ecosystem.
Backed by Als Labs, Morpho Society and Salon, the proposal claimed that the idle funds could generate $70 million annually by being deployed in Morpho's cash pools.
However, critics of the proposal pointed to significant risks to the stability of Polygon's ecosystem. Former Polygon employee Pranav Maheshwari expressed his concerns about the potential implications of deploying bridge assets on high-risk protocols.
Vulnerabilities in the underlying systems, such as hacking or financial instability, could compromise the value of assets secured by Polygon Bridge, he noted.
Maheshwari wrote in a post on social networks:
“Any attack on the underlying protocol can destabilize the ecosystem, compromise user assets and undermine trust.”
He warned that such scenarios could lead to a liquidity crisis similar to a “bank run”.
differences of opinion
The proposal also caused controversy with the DeFi protocol ghosta key participant in the Polygon ecosystem.
The founder of the Aave-Chan initiative, Mark Zeller, a Counter offer suggests that Aave withdraw from Polygon due to concerns about security risks associated with the initiative. His response indicated that the deployment of funds in Morpho could benefit Aave's competitors.
Polygon laboratories He responded with frustration, noting that Aave had previously proposed a similar approach to deploying stablecoin reserves into yield-generating mechanisms. It also accused Aave of being in a “exclusiveA way
The decision to reject this proposal reflects the community's preference for security and user trust over aggressive yield generation strategies. While the idea has been shelved, Polygon acknowledged the need for creative approaches to effectively manage its stablecoin holdings.
The platform's PoS bridge remains one of the largest holders of on-chain stablecoins, which is both an opportunity and a challenge for future governance debates.
