Though much has been said about the expectation of bridged assets and the implied contract between a bridge and its users, I want to take a second and focus on the beauty of the proposal and its ability to leverage what makes crypto so unique to create a flywheel that will be replicated by other ecosystems, if not Polygon.
Firstly, being able to drive $70M a year in non-mercenary capital to grow an ecosystem is insane. There are countless multibillion-dollar L1s and L2s with less stablecoin liquidity in the aggregate, not to mention within their DeFi ecosystem, and most of them pay up the ass for it. This drives more per year.
Secondly, allocating that liquidity in a decentralized mechanism that brings in other protocols, i.e., Yearn, is smart. It reallocated bureaucratic overhead to market efficiency while deepening a relationship with a key DeFi protocol. Cool. I’ll refrain from commenting on Morpho as idk what the risk-reward trade-offs are between their model and Aave’s, though the stated goal of wanting to own market parameters feels reasonable.
Thirdly, on the risk point, one wonders really how much marginal risk is being added here. On one level, if you already hold Dai and USDT, you’re already exposed to quite a risky collateral base for which you get a “return-free risk.” Taking on a little bit more risk by having an effectively senior position against a conservative collateral base in isolated markets sounds quite marginal.
Presumably, those that have bridged to Polygon are long the eco through some asset exposure. At first touch, the second-order gains far outweigh the marginal additional risk profile and, at the very least, are under-discussed here.