• AAVE protocol has prevented one particular account holder to pile up debts
• This action has evoked some interesting responses in the market, while some are favoring the account holders, others are justifying the protocol’s action

A few days back, the AAVE protocol was protocol with some significant changes in terms of functionality. It’s a fully-decentralized governance-based protocol that aims to bring more equality to voting and token-holding rights. On the face of it, the mechanism brings betterment on many fronts while solving some issues too. However, the protocol has become a hot topic for discussion due to one very particular reason.

Is AAVE violating the norms?

Reportedly AAVE actually prevents a peculiar account from taking debt from the market. Though the account name is not confirmed, many are guessing that it is of Curve(CRV) founder Michael Egorov. Because of this, some crypto users are accusing the protocol of violating the rules of “neutrality”. According to them, it is a grave issue and such behavior should not be practiced by crypto firms.

However, some other parties seem to be taking a lot of advantage through the platform. Gauntlet, a financial modeling platform has accumulated debt worth $67.7 million. Reporting the platform has used the Curve tokens as collateral. Now Gauntlet is saying that it is concerned about its burgeoning debt volume. It also fears that a sudden fall in the price of Curve may bring some liquidity problems.

As per the reports, the CRV has suffered a decline in liquidity over the past few months. The past performance begets some fear in the minds of the investors. The problem of not finding enough buyers of the tokens is the major one. Consequently, this issue may snowball into millions of dollars of debt as suggested by Gauntlet. 

Decent Muse, an AAVE user asserted that the wallet belongs to the founder of Curve. From his point of view, this could be a sly trick to gain profits from the venturesome activities on behalf of Curve. However, sources couldn’t confirm the identity of the wallet owner. 

The market has divided views on it

In the proposed draft, Gauntlet suggested that AAVE should stop holders to use CRV as collateral for loans. It suggests that the protocol should deploy a patch to fix this issue. This would enable the AAVE to continue holding its existing loan position without accumulating boatloads of debt. 

However, some forum participants spoke in favor of the protocol and blamed the account holders for debts. A user who goes by the name “AAVEBull” claimed that the account holder never had any intention of paying the debts. He said that the account has been consistently piling positions recklessly.

But the anonymous account holder also garnered support from many users. User pray.eth proposed a viewpoint that the account holder might be under the impression that CRV tokens are inherently undervalued. The belief led the holder to continue to pile up tokens and use them as collateral. 

Speaking in the same tone, Aave-Chain Initiative founder Marc Zeller favored the account holder. He asserted that AAVE DAO should stick to the core principles of DeFi which is neutrality. What users choose to do with funds is not the wallet provider’s concern. 

Conclusion

Since this incident, the censorship resistance has become a subject of debate. Rattled by high fees, many Bitcoin users are now complaining about minting practices and trading ordinals. We find users divided into two factions, some favor censorship while others are in favor of Ordinals.  As it seems that the discussion will go on for a few days,  One will have to wait and see how this pans out.