Controversy erupted in the decentralized finance (DeFi) world on June 12, when a proposal surfaced from the financial modeling platform Gauntlet meant to freeze a particular account from accruing any more debt. The Gauntlet proposal suggested freezing Curve (CRV) as collateral for loans in the AAVE DAO. Some accused the proposal of violating the neutrality and censorship-resistance protocols of DeFi, while others argued that the account, if not restrained, could lead to millions of dollars in bad debt for AAVE.
Potential Marketplace Impact: Liquidation of Curve (CRV) Tokens and Marketplace Slippage
The address, potentially owned by Curve founder Michael Egorov, held a debt of $67.7 million in USD Coin and Tether. Gauntlet expressed concern that the owner could keep accumulating debt despite the CRV token liquidity crisis. Liquidating the massive amount of CRV tokens associated with the wallet could lead to marketplace slippage.
DecentMuse, an AAVE user, alleged the founder’s ownership of the wallet and speculated on profit motives from Curve. However, Cointelegraph was not able to independently confirm the identity of the address’s owner.
Potential Motives: Speculation on Account Owner’s Belief in Undervalued CRV Tokens
The Gauntlet proposal suggested freezing CRV as collateral for loans in the AAVE DAO. This would halt the accumulation of additional debt for the account while allowing it to retain its existing loan position. Supporters of the proposal criticize the account for its great amount of debt without any intention of paying it off, while others stated that the account owner may believe CRV tokens to be undervalued, and thus, are taking advantage of the situation to use more of them as collateral.
Aave-Chan Initiative founder Marc Zeller supports neutrality in DeFi, advocating for users’ freedom to utilize the protocol. He also raised concerns about setting a precedent of censorship.
Heated Debate: Curve Founder and AAVE Community Clash Over Proposal
The proposal is a “recommendation” and not yet an official AAVE Improvement Proposal (AIP) for voting. Debates over censorship resistance and neutrality in DeFi have occurred many times before. In January, Bitcoin users debated a ban on Ordinals, and in April, Tether blacklisted an address that drained $25 million.
The recent proposal has sparked a heated debate between Curve founder and the AAVE community regarding DeFi’s censorship resistance. As of June 16, the proposal remains informal and the owner of the address is still unknown. The controversy highlights the importance of censorship resistance and neutrality in DeFi protocols, requiring user vigilance.
Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.
