Updates
Aave vs Morpho: The Battle for Polygon Assets
There's a new crazy liquidity war between two top DeFi protocols. The stakes? The security of $1.3 billion in stablecoins and the yields your assets might earn.
Here's the cast of characters:
- 1. Polygon PoS. A sidechain on Ethereum that holds ~$1.3B stablecoins on its bridge.
- 2. Aave. The dominant lending protocol on Polygon PoS.
- 3. Morpho. A rising competitor to Aave.
What happened? In the Polygon Forum, Morpho (with others) proposed using stablecoins on the PoS bridge to earn yield. That's reasonable, right?
This will conservatively give PoS ~$70M in annual yield, which can then be used for incentivizing the Polygon ecosystem.
At first, the idea gained traction. If approved, USDC & USDT on the PoS bridge were going to be deposited into Morpho.
Enter Aave's counterattack. They threatened that if the proposal was passed, they'd essentially leave Polygon PoS.
Can you blame Aave? They can't let a new kid on the block take their lunch money without a fight.
Aave raised some valid points:
- Stablecoins on PoS were deposited into Aave as well. If the proposal passes, Aave would be taking additional risks for no reward.
- Polygon would be exposing PoS stablecoin holders to additional risk for users without proportional reward.
This changed people's reaction to the proposal. Many saw it as an SBF-like move, deploying user funds without explicit consent.
But many also found it hypocritical of Aave. They were campaigning for a
similar deal with Polygon — Morpho just got more traction.
Polygon criticized Aave for acting monopolistically. Aave fired back with accusations of backroom deals.
The sentiment has shifted significantly. Now the proposal is unlikely to pass, not in the current form at least.
This saga highlights a larger trend in DeFi: DeFi protocols are increasingly fighting for the same pie and the competition is increasing.
Sponsored By Midas
$mBASIS: Where Smart Investors Parking Their Stablecoins
One thing I love about crypto is stablecoins. Why? Cause they offer way higher yields compared to traditional USD investments like T-Bills.
I'm always on the hunt for the best places to park my stables.
One standout solution is Midas $mBASIS. A unique stablecoin mechanism delivering 30% APY returns (the highest yield for a stablecoin in crypto). Unlike other mechanisms, $mBASIS leverages stablecoins (like USDC) to optimize rewards while minimizing exposure.
Here's how it works:
- The mechanism deploys stablecoins (like USDC) into a basis trade.
- A portion of the spot purchase is used as collateral for loans on Aave.
- The borrowed USDC is reinvested into the basis trade to enhance returns.
Thanks to Midas' risk mitigation frameworks, the risk associated with moderate leverage is nearly eliminated, keeping positions safe. (More details here.)
The result? High, stable yields for users and increased protocol utility. A win-win scenario for both users and protocols.
Partnerships like Re7 Capital (on Morpho Base) showcase $mBASIS success. In just seven days, supply grew +250%, reaching $750k.
Stop settling for low TradFi yields. Earn more with $mBASIS and experience the Midas Touch.
DeFi Yield
New EtherFi Campaign: 12 Days of Hayes
EtherFi, the leading restaking protocol, launched a new incentive campaign: 12 Days of Hayes.
This limited-time event lets you stack even sweeter rewards on top of their usual incentive program, which rewards users for using EtherFi.
What is the 12 Days of Hayes? If you mint new assets from their app between December 11th to 22nd, you'll get a share $3M ETHFI pool (plus some bonuses from partner protocol, which we'll cover at the end).
But don't miss the fine print. Otherwise, they'll lose rewards
- Mint, Don't Buy: Only assets minted directly from EtherFi during the campaign are eligible. Buying from DEXes doesn't count.
- Opportunity cost: To earn rewards, you must hold these assets until at least January 31st, the end of Season 4.
What will you get? Firstly, you'll get rewards from EtherFi's usual incentive program. You can learn more details about it here. You'll get the rewards from "12 Days of Hayes" on top of this.
The amount will depend on two factors: the total value of newly minted assets in the 12 days and the amount of assets minted by you.
Want to estimate your payout from this campaign? Click here. You can change the values for "total minted" and "your minted amount" to know how much you'll get.
As of now, $290M has been minted in this campaign, which means 13% additional APR. If we add a looping strategy, you can get >100% APR.
The Looping Strategy. As usual, DeFi ninjas can use more complex strategies to earn additional yield. We've covered looping a few times before. It's a form of leverage.
Right now, the interest for borrowing ETH against weETH is lower than the total EtherFi yield on weETH. So, you can use the following strategy to get even more yield.
- Step 1: Mint weETH on EtherFi
- Step 2: Borrow ETH against the weETH on Aave or Compound
- Step 3: Mint new weETH using the borrowed ETH
- Step 4: If you need more leverage, go back to step 2
While doing this strategy, there are two risks you have to watch for:
- Borrowing Costs: Ensure the borrow APY on ETH stays below the yield from weETH.
- Depegging Risk: While rare, weETH could depart from its ETH benchmark. If it does, you'll get liquidated.
EtherFi has teamed up with other protocols to sweeten the deal. Each day during the 12 Days of Hayes, completing specific tasks will earn you additional rewards from these partners.
Details of the tasks will be announced daily on Twitter and Discord, so stay tuned.
This campaign ends December 22nd, so you've only got five days left to participate!
🚀 DeFi Catalysts
Morpho is discussing deploying on as many chains as feasible. If successful, this should massively accelerate Morpho's growth.
Ethena launched $USDtb, which will diversify Ethena's risks. It'll be backed by BlackRock's BUIDL fund.
Moonwell DAO is voting on proposals that will help it optimize value capture from Oracle Extracted Value.
Instadapp (Fluid) and Lido are discussing a partnership. It'll be a mutually beneficial relationship that can grow both protocols.
Paraswap is discussing the shift of DAO from a DEX Aggregator to an Intents-centric decentralized trading platform.
Metis is voting on launching LeoFi on Metis. It'll provide a user-friendly interface for users using AI-powered tools.
Spectra Finance launched its v2. Its features include Pools, Portfolio, Fixed Rate, Yield Leverage, and Create Pool.
Lido has begun shutting down the staking service on Polygon PoS. By June 2025, Lido will stop the front-end support for Lido on PoS.
sBTC is live on Stacks Mainnet. In the initial phase, liquidity is limited to 1000 BTC, and only deposits are supported for now.
Scroll announced OpenVM. It'll allow developers to extend the ISA, ZK circuits, and proof system in one unified framework.
🪂 Airdrop Alpha
Pudgy Penguins has airdropped $PENGU. You have 88 days to claim your allocation. The remaining tokens will be locked in a smart contract afterward.
Aligned Layer is airdropping $ALIGN to ~900k addresses for those who held at least ~$50 worth of tokens of some projects like Polygon and StarkNet. You have just four more days to register for the airdrop.
Fuel Network is airdropping ~10% of the total supply of $FUEL to 200k+ addresses as part of its genesis drop.
Usual Money will launch its token on Binance spot in a few hours. The token airdrop will happen as well.
🐦⬛ X Hits
- How is the macro set up?
- Psychology of crypto market participants.
- Comprehensive list of 2025 Ethereum events.
- One of the best opportunities to buy.
- ai16z is partnering with Stanford.
😂 Meme
Until next time,
Edgy "has noticed that memecoins aren't as funny when the prices are going down"
Today's email was written by Edgy and Yayya.
DISCLAIMER: I'm NOT a financial advisor. This content is for education and information purposes only. Crypto and DeFi are risky and speculative. Please do your research before investing.
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