Rivals Over Censorship-Resistance: $110M Leverage Position in DeFi Causes Heated Debate Between Curve Founder and AAVE Community

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.

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Chris Griffin
Chris has had a career as an advisor to the tech industry, incubating start-ups in the tech industry. Welcoming Chris to contribute his expertise covering the latest things he sees in blockchain