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Decentralized Lending Platforms Engage in Conflict Following Web3 Adoption
In the recent surge of Web3 adoption, a dispute has arisen between two competitors in the decentralized lending space. Gauntlet, the market risk manager for AAVE, was discovered to be engaging in collaboration with MakerDAO, a direct competitor of AAVE. Gauntlet’s departure from AAVE sparked further tensions between the two platforms, highlighting the intricacies of their operational models.
Key Differences Between AAVE and MakerDAO
One of the primary distinctions between AAVE and MakerDAO lies in their approaches to setting interest rates. AAVE determines interest rates based on the utilization rate of the crypto assets involved, while MakerDAO allows MKR investors to establish the interest rates for its platform. Additionally, MakerDAO primarily uses DAI as collateral, whereas AAVE accepts a diverse array of crypto assets for borrowing purposes.
Furthermore, AAVE incentivizes liquidators to address debt positions in cases of under-collateralization, where the borrowed amount surpasses the value of the collateral. In contrast, MakerDAO implements a collateral ratio mechanism, enabling automatic liquidation of funds if the ratio falls below a specified threshold.
Recent Developments and Proposals
In March of this year, AAVE’s community airdrop excluded users of the Morpho Aave optimizer, triggering discontent among DAO members who perceived it as diverting funds from the flagship protocol. Marc Zeller, the creator of the Aave Chain Initiative, proposed a 0% loan-to-value ratio for MakerDAO’s DAI stablecoin after this incident, potentially disrupting the market dynamics and restricting DAI usage as collateral.
The Aave Chain Initiative, represented by the principal Aave DAO delegate, is advocating for this proposal as part of AAVE’s loyalty premium program. Zeller has expressed reservations regarding a possible rift between MakerDAO and Gauntlet, emphasizing the unnecessary nature of such a separation for AAVE’s ecosystem.
The MakerDAO proposal, spearheaded by the Spark subDAO, aims to segregate Maker’s balance sheet into USDe and sUSDe tokens issued by Ethena, a stablecoin provider. This initiative has drawn criticism from Zeller, who disapproves of Maker’s management practices and lack of supervision on social media platforms.
Collaborative Efforts and Industry Reactions
Spark, a lending protocol initially derived from AAVE, has recently established ties with Morpho, a major player in AAVE’s ecosystem. This collaboration could potentially facilitate the proposed allocation adjustments. Meanwhile, Zeller’s critique of Maker’s performance prompted a discussion within AAVE’s governance forum, with Stani Kulechov, AAVE’s founder, advocating for the complete removal of DAI from all AAVE markets.
Sam MacPherson, CEO of Phoenix Labs and a contributor to Spark, raised concerns about AAVE DAO’s plan to enforce a 0% loan-to-value ratio on DAI. Industry observers expressed apprehension about the escalating conflict between AAVE and Maker, fearing the division of the DeFi landscape into isolated ecosystems. Matt Fiebach, a research analyst at Blockworks, echoed these sentiments, expressing disappointment in the fragmentation of the decentralized finance sector.
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