The crypto lending protocol Aave recently encountered an issue with an older version of its platform, which prevents users from interacting with Wrapped Ether (WETH), Tether (USDT), Wrapped Bitcoin (WBTC), and Wrapped Matic (WMATIC) pools on Aave V2 Polygon. This bug also blocks users from withdrawing assets from these pools, creating a potentially troublesome situation. However, the Aave team has assured that the funds are “perfectly safe” and the issue can be resolved after a governance vote.
A closer examination of the problem revealed that the root cause lies in Aave V2’s latest ReserveInterestRateStrategy upgrade, which is only compatible with Ethereum, and not Polygon. Consequently, assets worth approximately $110 million have been impacted. It is important to note that this bug exclusively affects Aave V2 on Polygon, while Aave V3, V2 deployments to Ethereum, and Avalanche remain unaffected.
The troublesome situation arose due to a May 16 interest rate curve patch that was applied to all deployments of V2. The Polygon-specific implementation of V2 features a slightly different list of function definitions (the “interface”) for its rate strategy contracts as compared to Ethereum and Avalanche implementations. Unfortunately, the interest rate curve changes did not account for this critical difference, resulting in the development of the bug exclusively in the Polygon deployment.
In response to this issue, a proposal has been put forth asking Aave’s governing body, Aave DAO, to approve necessary code changes for the Polygon version in order to fix the patch. Voting on this matter is scheduled to commence on May 20 and continue through May 23, according to the proposal.
Aave is best known for its flash loan feature, which allows users to borrow crypto, execute trades, and repay the loans within the same block, all without needing collateral. Originating on Ethereum, Aave has been exploring expansion into other networks over the past years. For instance, on April 17, Aave governance voted to deploy the protocol on zkSync Era, a layer 2 solution for Ethereum utilizing zero-knowledge proof technology. Additionally, on May 8, Aave V3 was deployed to the Metis network, which is also a layer 2 solution for Ethereum.
While the bug is undoubtedly a significant bump in the road, Aave is actively working to amend the situation and continue pursuing its expansion plans. The upcoming governance vote holds the potential to influence the protocol’s future trajectory, making it crucially important for the community to stay engaged and informed.