Aave, a leading decentralized lending protocol, has released a proposal to address potential risks associated with MakerDAO’s recent expansion of the DAI stablecoin supply.

MakerDAO, another major DeFi player, is responsible for issuing DAI, a popular stablecoin pegged to the US dollar. Their recent D3M initiative rapidly increased the DAI credit line from zero to an estimated 600 million DAI within a month, with projections reaching 1 billion DAI soon.

Aave argues that this rapid expansion might introduce instability into the DeFi ecosystem. Their proposal aims to mitigate these risks by removing incentives for users to deposit DAI on Aave. Specifically, they propose eliminating sDAI rewards from the Merit program, a system that distributes AAVE tokens to users who participate in the protocol.

Aave emphasizes that this change would have minimal impact on users since only a small portion of DAI currently serves as collateral on their platform. Users can seamlessly switch to other stablecoins like USDC or USDT if they prefer.

This proposal highlights an ongoing debate within the DeFi community regarding the appropriate pace of stablecoin growth and potential systemic risks. Aave’s move suggests some DeFi players are concerned about the potential consequences of overly rapid expansion.

The success of this proposal hinges on a vote by Aave’s governance token holders (AAVE). If approved, it could lead to a shift in how DAI is used within the DeFi ecosystem. It’s important to monitor the situation and its potential impact on the broader DeFi landscape.