Aave "declared war" on MakerDAO

On the evening of April 2, the DeFi community was abuzz with the battle between Aave and MakerDAO, the two top lending protocols in the market and are also developing their own stablecoin.

The first big shot was probably the proposal of Marc Zeller, a core member of the Aave community. This proposal will set the loan limit collateralized by Maker's DAI stablecoin to 0%. Besides, this proposal also removes sDAI from Aave's Merit reward incentive program.

This proposal essentially cuts off any application of stablecoin DAI within Aave's ecosystem.

The reason given in the above proposal is that DAI has injected a large amount of stablecoins through the D3M mechanism for an unproven protocol, Ethena, and this rate could even increase to 600 million - 1 billion. DAI in the near future. This step is for Aave to prevent risks because it has encountered precedents (albeit on a smaller scale) before.

It is noteworthy that D3M was a collaborative initiative to help Aave and MakerDAO effectively circulate liquidity in the past.

Below the post, Aave founder Stani Kulechov also expressed his approval of stopping support for stablecoin DAI.

Previously on the morning of April 2, MakerDAO announced a plan to cooperate with Morpho and Ethena to inject 600 million DAI into the lending pool. This move comes after the 100 million DAI previously pumped into the pool was quickly borrowed due to overwhelming demand.

In response to criticism from Aave, an "ally" of MakerDAO, Morpho, also corrected the liquidity injection mechanism through D3M. A representative of the Morpho team said that the lending pool will include sUSDe as collateral and DAI as the asset used for the loan. And the mechanism will have a protective barrier with a liquidation level of 86% (ie when the loan exceeds the threshold of 86% of collateral).

With the latest developments, it is likely that the plans of the two sides will soon be approved. The DeFi community believes that if there is a real war breaking out between the two sides, it would be a pity when the connection between products in the ecosystem is broken.

Regardless of the reason announced in the media, many people still believe that the core reason lies in the fact that the two protocols are "trampling" each other in two important areas: Lending and Stablecoin. With its more "risky" strategies, MakerDAO seems to be ahead, quickly bringing DAI to the high yield sources of recent hot trends. However, on the other side, although Aave is not very successful with the stablecoin segment, GHO, it is still a difficult counterweight to move in the Lending segment with the volume of assets locked in the protocol always at the top.

Recently, MakerDAO said that using DAI to complement USDe and sUSDe will open up more opportunities for users to participate in DeFi.

According to a proposal posted on the evening of April 1, the MakerDAO community is considering allocating an additional 600 million USD of stablecoin DAI to the liquidity pool of Ethena's stablecoin USDe and its locked version sUSDe on Morpho Blue - protocol lending of the Morpho project.

The proposal comes just days after Maker launched a lending pool for USDe/DAI and sUSDe/DAI on Morpho Blue, allowing users to mortgage Ethena assets to borrow DAI. The initial amount of liquidity provided to the pool is 100 million DAI. However, just a few hours later, this lending pool ran out of DAI, showing great demand from users.

Ethena Labs Growth Director Seraphim Czecker said that if the proposal is approved, it will help Ethena's TVL increase at the speed expected by the project.

Although it was just launched in February 2024, Ethena has so far attracted 1.5 billion USD TVL thanks to its unique model.

Accordingly, the project will issue USDe stablecoin backed by Ethereum (ETH). To hedge the risk of ETH price falling affecting the stablecoin value, Ethena will establish short ETH positions on major exchanges to form a delta-hedging strategy. The project will also pay ETH staking interest and ETH futures funding fees to sUSDe locked version holders, with an APR currently up to 35.4%. The total value of ETH futures contracts that Ethena is holding accounts for 16.38% of the total open interest of ETH futures globally.

Recently, Ethena announced an airdrop event of ENA governance tokens based on shards (reward points) collected by users since the project deployed mainnet in February. ENA tokens are expected to be listed on shards. major trading floor on the afternoon of April 2.