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An Aave proposal intended to prevent a particular account from accumulating more debt has led to significant controversy, with some stating that it violates the principle of neutrality in DeFi.&nbsp;
The proposal suggested imposing a cap on using CRV tokens as collateral, preventing the wallet address in question from adding more loans.&nbsp;
The Account In Question&nbsp;
Many believe that Curve (CRV) founder Michael Egonov owns the account in question. Egonov had begun borrowing stablecoins on Aave in April, beginning with $37 million worth of Tether (USDT) being sent to Bitfinex and a further $51 million in USDC being sent to market maker Wintermute. More recently, Egorov deposited $24 million worth of Curve DAO (CRV) tokens to Aave to mitigate the liquidation risk of a $65 million stablecoin loan.

&nbsp;&ldquo;Seems like Curve&rsquo;s founder has a $110m leverage position against his $CRV stack across all Defi. If not repaid at some point (spoil: it prob won&rsquo;t, my man is taking profit), this will cascade into a lot of bad debt for lending protocols.&rdquo;

Liquidation Risk&nbsp;
According to the author of the proposal, the address associated with the account (0x7a16ff8270133f063aab6c9977183d9e72835428) has gone on to accumulate over $67 million worth of debt in USDC and USDT using the AAVE v2 protocol and putting up $185 million worth of CRV tokens as collateral. The proposal&rsquo;s author expressed concern that the account could continue increasing its debt, increasing the risk that it could be liquidated if the price of CRV suddenly drops. Adding to the problem is the fact that CRV has suffered a recent decline in liquidity over the past few months.&nbsp;
This could lead to considerable slippage if the account is liquidated, as there may not be enough buyers looking to purchase CRV and take on such a significant amount of CRV tokens, leading to millions of dollars worth of bad debt for the Aave protocol.&nbsp;
Freeze on CRV As Collateral&nbsp;
According to Aave user DecentMuse, the wallet address is tagged as belonging to Michael Egonov, the founder of Curve. According to the user, the loan could be a way for Egonov to take profits from his activities on behalf of Curve. Financial modeling platform Gauntlet, the proposal&rsquo;s author suggested that the AAVE decentralized autonomous organization (DAO) freeze further use of CRV tokens as collateral for taking out loans. Such a move would allow the account to hold its current loan position but prevent it from accumulating more debt.&nbsp;
The proposal found some support among users who criticized the account for taking on so much debt. One user wondered if the account intended to pay off its debt, adding that it constantly added to its position despite the token losing value.&nbsp;
Proposal Criticized&nbsp;
However, critics of the proposal defended the account. One user suggested that the account owner may believe that CRV tokens are undervalued, leading them to increase their use as collateral as their price declines. Marc Zeller, Aave-Chan Initiative founder, also put forward his views, adding that the AAVE DAO should not violate neutrality, which is one of the core tenets of DeFi.&nbsp;

&ldquo;The intention of users or what they do with their funds is not our primary concern. Users should be free to utilize the protocol as they see fit.&rdquo;

So far, the proposal is only listed as a &ldquo;recommendation,&rdquo; meaning it has not yet been turned into an Aave Improvement Proposal (AIP), which the DAO can vote on. However, Gauntlet has stated that turning it into a formal AIP is the next step.&nbsp;
An Ongoing Debate&nbsp;
There is an ongoing debate in the larger blockchain ecosystem regarding the limits of censorship resistance. In January, Bitcoin saw a similar debate where users complained of high fees caused by some users minting and trading ordinals. Some Bitcoin users wanted a ban on Ordinals, while others opposed a ban, stating it would be censorship. In April, Tether blacklisted an address that drained $25 million from EVM-front-running bots.&nbsp;
Jayanti Kanani, Polygon co-founder, stated that the blacklisting could establish a bad precedent and lead to more transactions being censored. However, ZachXBT, the on-chain sleuth, stated that Tether could have been forced to act by a court order.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Aave’s Proposal To Freeze Curve Founder Loans Draws Community Ire

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