Aave proposal to freeze alleged Curve founder’s loans draws controversy

A June 12 AAVE (AAVE) proposal aimed toward stopping a specific account from accumulating extra debt has led to controversy, with some contributors arguing that the proposal violates the precept of censorship-resistance or “neutrality” in decentralized finance, or DeFi.

Some contributors imagine that the account is owned by Curve (CRV) founder Michael Egorov. Cointelegraph was not in a position to independently affirm who the account’s proprietor is.

Uhh looks like Curve’s founder has a $110m leverage place in opposition to his $CRV stack throughout all Defi.

If not repaid in some unspecified time in the future (spoil: it prob gained’t, my man is taking revenue), this may cascade into a variety of dangerous debt for lending protocols https://t.co/kxwc0Sk65V pic.twitter.com/yhHp9JFWBV

— vapor (@trading_vapor) June 14, 2023

In response to the proposal’s writer, monetary modeling platform Gauntlet, the Ethereum handle 0x7a16ff8270133f063aab6c9977183d9e72835428 has accrued $67.7 million value of debt in US Greenback Coin (USDC) and Tether (USDT) by way of the AAVE V2 protocol utilizing $185 million of Curve tokens as collateral.

Gauntlet expressed fears that this account might proceed rising its debt, resulting in the danger that it could be liquidated if there’s a sudden fall within the worth of Curve. Compounding the issue in Gauntlet’s view is the truth that CRV has suffered a decline in liquidity over the previous few months. This may increasingly trigger slippage if the account will get liquidated, as there is probably not sufficient consumers of CRV within the market prepared to tackle such a lot of tokens.

This may increasingly result in thousands and thousands of {dollars} in dangerous debt for AAVE, Gauntlet recommended.

AAVE person DecentMuse claimed that the pockets handle “is tagged as belonging to the founding father of Curve,” indicating that it could belong to Egorov. In DecentMuse’s view, the mortgage might characterize a approach for the founder to take income from his entrepreneurial actions on behalf of Curve. Cointelegraph was not in a position to affirm the identification of the handle’s proprietor.

Within the proposal, Gauntlet recommended that the AAVE decentralized autonomous group (AAVE DAO) ought to implement a patch to freeze any additional makes use of of CRV as collateral for loans. This could enable the account to proceed holding its present mortgage place, however would additionally forestall it from accumulating any additional debt.

Associated: Bug in Aave v2 on Polygon causes some property to turn into caught in contracts

Some discussion board contributors supported the proposal and criticized the account for piling on a lot debt. For instance, a person who goes by the deal with “AAVEBull” reportedly claimed that the account will need to have no intention of paying off its money owed, because it has repeatedly added to its place because the token has declined in worth.

In response, critics of the proposal defended the account. For instance, person pray.eth acknowledged that the account’s proprietor might merely imagine CRV tokens are radically undervalued; main them to imagine that as the value declines, it is smart to extend their use as collateral.

Aave-Chan Initiative (ACI) founder Marc Zeller, who’s a frequent participant within the boards, additionally weighed in on the proposal. He acknowledged that AAVE DAO must be cautious to not violate “the core ethos of DeFi, which is neutrality.” “The intention of customers or what they do with their funds is just not our major concern,” Zeller acknowledged, including “Customers must be free to make the most of the protocol as they see match.”

The proposal is listed as a “suggestion” as of June 16. Which means it has not but been became a proper AAVE Enchancment Proposal (AIP) that may be voted on by the DAO. The writer has acknowledged that turning it into a proper AIP is the proposal’s “subsequent step.”

Members within the blockchain ecosystem proceed to debate the bounds of censorship-resistance. In January, many Bitcoin customers complained of excessive charges brought on by different customers minting and buying and selling Ordinals. Some customers needed to ban ordinals, whereas others noticed a ban as censorship.

On April 11, Tether blacklisted an handle that had drained $25 million from EVM front-running bots. Polygon co-founder Jaynti Kanani mentioned the blacklisting established “a nasty precedent” that might result in extra transactions being censored, whereas on-chain sleuth ZachXBT claimed that Tether might have been compelled to interact within the act resulting from a courtroom order.

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