Aave's Proposal Would Disconnect Fantom Due to Security Concerns

 With so many recent DeFi bridge attacks, an Aave governance proposal advises deleting Fantom integration. Is the multi-chain story quickly sinking?



Crypto hacks have had a difficult few weeks.

People have been reminded of the significance of hardware wallets, for example, in light of the recent Solana hack's aftermath. As of right now, we know that over 15,000 cryptocurrency wallets were compromised, and almost $4.6 million was stolen. Yikes.

Bridge hacks have also happened often. Bridges are essential components of the cryptocurrency infrastructure that enable users to transfer money between blockchains. For instance, native assets on Avalanche cannot exist on Harmony without the aid of a bridge.

Bridges are crucial to the multi-chain universe theory, which is held by those who subscribe to it. Unfortunately, recently, these platforms have been absolutely pummeled.

The most recent episode focused on a hack of Nomad earlier this week that cost about $190 million. However, there have been numerous others, including the $622 million Ronin bridge hack by Axie Infinity, the $320 million Wormhole hack in February, and the $100 million bridge between Harmony and Ethereum. Even though the blockchain company Chainalysis thinks that the total lost across all 13 bridge hacks this year is closer to $2 billion, more than $1 billion was taken in just those three attacks.

Even though the blockchain company Chainalysis thinks that the total lost across all 13 bridge hacks this year is closer to $2 billion, more than $1 billion was taken in just those three attacks.

With so much money at stake, at least one DeFi project is taking steps to mitigate this risk.

A recent proposal on lending and borrowing protocol Aave suggests the community pause all Fantom-based integration.

“This action would protect users by disabling the ability to deposit or borrow assets in the Aave V3 Market on Fantom, while still allowing repayment of debt, liquidations, withdrawals, and changes to the interest rates,” it reads.

If you’re just catching up, Aave lets you lend out idle crypto to earn a percentage minus a small fee paid to the protocol for doing so. Fantom is a layer-1 blockchain built using the proof-of-stake (PoS) consensus mechanism and is optimized for speed.

Fantom, like Ethereum, has a ton of different DeFi apps. So even a ton of Ethereum-first DeFi apps, such as Aave, have made their services available on Fantom.

The list of networks where Aave is available currently includes Avalanche and Fantom, as well as a few layer-2 networks like Optimism, Arbitrum, and Polygon.

Integrations with these other blockchain networks rely on bridges. And in the eyes of the latest Aave proposal, the risk of relying on this bridge outweighs the reward (at least on Fantom).

The proposal also points out that Fantom doesn't generate much in fees for Aave's treasury anyway: a mere $30.

“The Fantom Aave V3 market did not gain noticeable traction with a current market size of $9M and $2.4M of open borrowing position; this led to a market generating on average $300 of fees daily for the protocol (~$30 of daily fees for the Aave treasury),” the proposal reads, adding that if the Fantom bridge breaks or gets hacked, users will be left with nothing.

Just for reference, Aave on Ethereum currently rakes in $327,000 per day, followed by Aave on Avalanche which earns $133,366 per day.

This wouldn’t be the first time Aave has closed a crypto bridge. Following that Harmony bridge hack, Aave did the same; unfortunately, they’d already been affected.

Now, the discussion is still in the proposal phase, but on Monday it'll move over to the DAO voting platform Snapshot for an official vote on the outcome.

The broader point here is that the multi-chain narrative is sinking fast.

Aave is a large community and currently DeFi’s fourth-largest by total value. And with a birthplace on Ethereum, it's backed by an even larger community.

Plus, the Ethereum merge is on the horizon and layer-2 networks on Ethereum are gaining traction. Insofar as a multi-chain future promised low fees and high speeds, maybe it won’t matter in the end.



Share:

No comments:

Post a Comment

Note: only a member of this blog may post a comment.

Hot Topic

CEO of Messari: "Bear Markets Are Good for Cleaning House."

 Although most of the crypto industry has had a difficult winter, Messari CEO Ryan Selkis believes that a little austerity will be good for ...

counter, at the bottom of the page, in a table, div or under a menu.