Aave governance delegate Marc Zeller has aired concerns over the future of the decentralized finance (DeFi) lending platform on Polygon in the wake of a controversial proposal to use funds locked in the network’s bridge to earn yield elsewhere.

Aave is the largest protocol on Polygon, accounting for over a third of the chain’s total value locked (TVL) at $467 million, according to data from DeFiLlama.

Read more: Advisors leave Aave as protocol punishes competitors

The proposal to create a “Polygon PoS Bridge Liquidity Program” is currently in pre-PIP status and, in the four days since publication, has generated discussion between concerned and yield-hungry users alike.

While some point to the potential boon to the ecosystem of the program’s profits being “strategically deployed… to incentivize liquidity and stimulate project growth,” others raised security worries.

Many users pointed out that stablecoin holders are especially risk-averse and adding layers of risk onto a “stable” product is precisely the opposite of why users hold these assets. 

The $1.3 billion worth of idle stablecoins would be bridged for use on Ethereum via Aave competitor Morpho, with vaults being “curated” by the proposal authors AllezLabs. A “conservative” yield of 7% would be targeted, potentially earning over $90 million per year.

The resulting lending interest would then be funneled back to Yearn on Polygon, where it would be distributed among yield farming vaults to incentivize activity on the chain.

In Zeller’s own discussion thread on Aave’s governance forum, he cites examples of bridge hacks such as Ronin, BNB Bridge, Wormhole, and Multichain as making up many of the largest losses in DeFi over recent years. He proposes to “set loan-to-value (LTV) for all assets on Aave V2 and V3 Polygon to 0%,” essentially disabling new borrowing, as well as incentivizing the migration of already-deposited assets to other networks.

Read more: Explained: How $600M was stolen from Binance’s BNB chain

However, the fact that the proposal would see funds funneled to Morpho likely also doesn’t sit well. Aave and Morpho haven’t been on the best of terms since risk manager Gauntlet jumped ship from the former to the latter.

Tensions flared again when Zeller accused Gauntlet and Morpho of not doing enough to protect users in the wake of a depeg of restaking token ezETH in April.

Read more: Depeg of $3B restaking token ezETH causes over $60M in DeFi liquidations

Meanwhile, Aave has been riding the wave of the recent DeFi renaissance, breaking its all-time high of $38 billion worth of net deposits. Even a President-elect Donald Trump-linked address has been buying the AAVE governance token ahead of the planned launch of World Liberty Financial (also Trump-linked, despite a lengthy disclaimer) as an Aave instance on Ethereum.

Perhaps Polygon needs Aave more than Aave needs Polygon.

A Polygon Labs spokesperson told Protos: “The Polygon community has only put forth a pre-PIP (preliminary proposal) at this stage, and the topic is still in the very early phases of discussion. The Polygon community, which includes dApp builders across protocols, values open dialogue and collaboration as integral parts of the governance process. Getting feedback from all stakeholders is essential, and we encourage continued conversation to ensure these proposals are fully discussed and evaluated. Polygon Labs is supportive of the community continuing to prioritize the security of the ecosystem”

UPDATE 16/12/2024 20:33 UTC : Included a quote from Polygon Labs spokesperson.

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Polygon Labs has reportedly been paying a publicly-traded sports betting firm millions in crypto to run one of its now-defunct network validators.

This is despite convincing the rest of the community that the company was just another validator.

As reported by CoinDesk, DraftKings was announced as a Polygon validator in early 2022 in what the crypto company called “an important milestone.” However, Polygon failed to make public the special arrangement that would see it pay DraftKings millions of MATIC tokens over the next 20 months.

According to CoinDesk’s extensive research, the sports betting firm received a lump sum of millions of MATIC tokens at the very beginning of the partnership in late 2021 followed by millions more through a special staking relationship.

Though it’s not uncommon for high-profile firms to be paid by blockchain companies to work with them, this particular offer wasn’t offered to the vast majority of Polygon’s validators. In other words, DraftKings was far from the “equal community member” Polygon claimed.

Read more: Polygon hit by 157-block ‘reorg’ despite hard-fork to reduce reorgs

DraftKings wasn’t giving value for MATIC

At the beginning of the relationship, Polygon reportedly set aside 10 million MATIC for DraftKings but handed over 60 million in total to the validator.

This allowed DraftKings to take more than 3 million tokens out of the network, making it somewhere in the region of $2 million at today’s prices. Without the 60 million MATIC donated to it by Polygon, DraftKings would likely have made less than 5% of this figure meaning that, far from being an equal community member, it was more or less totally reliant on Polygon.

Not only that, as these tokens were not previously staked, they severely reduced the rewards available to other validators. DraftKings also charged 100% commission — a far cry from the more traditional 5% — 10% charged by other validators.

However, despite these massively unfair advantages and the wildly preferential treatment shown to it, DraftKings still couldn’t keep up its end of the bargain.

Polygon validators are expected to carry out a number of tasks, including checking the chain. Unfortunately, DraftKings failed at this spectacularly, receiving warnings in September and October of this year. On October 19, it was eventually yanked from the network and its 60 million MATIC tokens were moved, fee-free, to a different validator.

According to a DraftKings employee, “We are working with a third-party provider to have our validator node reinstated on the Polygon network adhering to standard procedures that all Polygon validators must follow. This will not impact our customers.”

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Donald Trump’s baseball card-style NFT collection enjoyed a jump in price this week after the former president and 2024 election hopeful appeared on Tucker Carlson’s X-based interview show.

As reported by CoinDesk, in the hours after the viral interview, the 45,000-card polygon-based Trump Digital Trading Cards were selling for around 0.13 ether (about $215). This is a significant jump from last week’s 0.1 ether ($150) price tag.

OpenSea data shows that the collection, which originally launched last December for $99 apiece, has so far seen in excess of 17.5 ether ($29,000) in volume.

The cards depict the orange-hued billionaire in a series of heroic poses and outfits, including an astronaut, a soldier, George Washington, Elvis Presley, and a guitar-toting motorcycle rider. The original run sold out within 24 hours.

Read more: It sure looks like Melania Trump wash traded her ‘white hat’ NFT for $170K

Those ‘lucky’ enough to snag themselves a card were also given the chance to win a dinner at Mar-a-Lago with Trump, a round of golf with the former president, or even a Zoom call.

Last month, in a revised filing, it was revealed that CIC Digital LLP, the company owned by Donald Trump that licenses his likeness for use on the NFTs, had less than $1,000 in its US bank account.

The firm did, however, hold an Ethereum wallet containing somewhere between $250,000 and $500,000.

Trump revealed CIC’s financial details alongside another 100 other income sources worth a combined $1.2 billion.

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On Wednesday, Polygon experienced a blockchain quirk affecting 157 blocks or approximately five minutes worth of network activity.

After blocks appeared to have stopped being produced for several minutes, the Ethereum side-chain’s co-founder Sandeep Nailwal tweeted that (block explorer) Polygonscan was “having some issues.”

In actual fact, the interruption was down to a chain reorganization or ‘reorg’, a problem that Polygon is attempting to fix.

Reorgs occur when network nodes fall out of sync with each other, and two distinct chains of blocks are produced concurrently. This may be due to a bug, network latency, or even malicious activity. When nodes sync once again, one canonical version of the chain is kept, and the blocks included in the invalid ‘fork’ are ignored.

Potential consequences of reorgs can include delays in achieving transaction finality, reverted transactions, or theoretically, a 51% attack on a (reduced) validator set.

Reorgs of a few blocks are not uncommon, and generally have no effect on users. But this case caused concern due to the ‘depth’ of the reorganization, which included 157 blocks. This could potentially have affected hundreds of users’ transactions. 

The following day, Uniswap founder Hayden Adams publicly called out the network, referring to both Wednesday’s disruption and another 120-block reorg in December.

Nailwal’s fellow co-founders Mihailo Bjelic and Jaynti Kanani stressed that this case was down to a specific bug and that current efforts are already underway to address the issue.

Read more: Explained: Is Polygon truly decentralized?

Polygon is well-established as a popular, low-cost alternative to Ethereum mainnet. The network saw a huge increase in its user base during the Spring of 2021 as gas prices on Ethereum became exorbitant.

However, as a cheap Ethereum side-chain with less demanding users, Polygon has often faced rather less scrutiny than alternative Layer 1 blockchains, such as Solana or Avalanche.

As well as lengthy reorgs, Polygon has been prone to (relatively) high gas fees. These can be due to spam transactions — which are cheaper to send than on mainnet — or blockchain-based games, such as last year’s Sunflower Farms, which take up significant network resources and cause congestion.

That said, the community is “addressing reorgs and gas spikes” in recent discussions on Polygon forums, and a January update, to which Kanani referred in the above tweet, aims to improve these issues.

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Polygon, an Ethereum scaling platform that claims to be decentralized, is landing partnerships with major names. Already a partner with Coinbase NFTs, it just became the primary provider of Instagram’s upcoming NFT marketplace.

Of course, when crypto starts landing large deals, some people start asking big questions — like whether Polygon is truly decentralized.

Formerly known as MATIC Network, Polygon offers Layer 2 scalability solutions for Ethereum. It bills itself as “Ethereum’s Internet of blockchains.” Instead of reinventing Ethereum’s Layer 1, Polygon focuses on improving scalability and speed.

Ethereum focused on decentralization, though this came at the cost of occasional “traffic congestion” issues and high transaction fees. Polygon aimed for low costs and high speeds. Nowadays, it can handle 7,000 transactions per second (TPS), while Ethereum rarely handled more than 20 TPS before the Merge.

For those wondering: The Merge may not have improved Ethereum’s TPS much. Stats show that post-Merge Ethereum still tops out at 20 TPS most of the time.

Read more: Here’s why Ethereum 2 staking is risky and increases centralization

Polygon didn’t try to be an Ethereum-killer. Instead, it aimed to improve on work that Ethereum had already completed. It also raised $5.6 million during its initial coin offering (ICO) and subsequent sales of its MATIC token, which resides on Ethereum as an ERC-20 standard token.

Who uses Polygon (MATIC)?

Polygon boasts more than 37,000 dApps on its platform. These dApps include familiar names like the decentralized exchange SushiSwap and the financial services app Cashaa.

Companies like Instagram and Coinbase forged deals with Polygon for their NFT marketplaces. Disney showed interest by adding Polygon to its accelerator program in June 2022.

Participants in Disney’s latest accelerator program are developing experiences for augmented reality (AR), NFTs, and artificial intelligence (AI) theme park properties.

Is Polygon decentralized?

In August 2021, Polygon announced an ostensible decentralized autonomous organization (DAO) as part of its efforts to become more decentralized. Polygon had recently acquired Hermez, the zero knowledge (ZK) rollup platform, to assist with switching Polygon to a cross-chain protocol.

It also formed the Polygon Governance Protocol to attempt to steer its path toward greater decentralization. It postponed a proposal on its auction model due to concerns that a validator controlled by a wealthy actor could push out smaller validators. Polygon’s forum members had also expressed concern about onboarding new validators and protecting the interests of smaller validators.

Owners of MATIC can delegate their tokens to bigger validators who cast votes for them. Community members have expressed concern that MATIC owners can’t access the track record of each validator prior to delegating.

Read more: What is Gnosis Safe and how is it centralizing Ethereum?

Other decentralized properties like UniSwap ran into issues with potentially unethical behavior by large delegates. Binance, a particularly large MATIC delegate, previously denied using the tokens that its customers keep on its exchange to gain more votes on UniSwap proposals. A delegate address associated with Binance has not voted at all, yet could cast more than 13 million votes if it wanted to.

Polygon’s delegated power structure could also lead to increased centralization among validators, as everyday users have strong incentives to delegate their MATIC to central custodians with more time, attention, ability, and financial incentive to participate in governance actions.

A few big delegates could conspire to control the vote. The top 10 UniSwap delegates control 42.35% of the votes ⏤ not quite a majority, but enough that this oligopoly could conceivably block an otherwise sound proposal, if they conspired.

Despite its marquee brand partnerships, Polygon is risking decentralization theater. It could just shrug its collective shoulders, though. After all, it has already attracted big names like Coinbase, Instagram, and Disney.

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High street coffee giant Starbucks announced a new NFT project on the same day that it revealed that its unionized branches won’t be granted access to its student loan or savings account benefits. 

But, despite being released simultaneously, the two separate announcements garnered very different levels of interest.  

On Monday, the company announced its NFT project in partnership with Ethereum scaling platform Polygon as part of the company’s new rewards system, Starbucks Odyssey. 

At the same time, the firm unveiled two new staff benefits, namely a student loan management service and a Starbucks savings account. The latter pays money to its staff for reaching specific milestones.

However, as reported by Law360, the new benefits won’t be extended to an estimated 325 unionized Starbucks branches. This is because, in July, the company said that it won’t offer any new benefits while bargaining with unions.

Read more: TikTok guy mines Bitcoin at Starbucks ‘for free’ — still loses money

NFTs overshadow union coverage

The Starbucks Twitter press account distributed the benefits press release around 3pm PST, while the NFT partnership was announced twice, at 9am and 7pm PST. On both occasions, the NFT-related posts garnered far more interest and interaction.

Indeed, a search for ‘Starbucks’ on Google news shows roughly 73 articles about the Polygon NFT partnership but only 10 on the new benefits package. Even then, most headlines failed to mention the union exclusion.  

The Starbucks benefit press release also failed to explicitly mention how unionized branches will not be receiving the benefits package, referring only to “eligible partners.” 

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