Betting $50,000 against Aave, can Polygon's new token KAT live up to its dual-token ambitions?

Original Title: "Behind the $50,000 Bet, Why is Polygon's New Coin KAT Not Well Received?"

Original Author: Ding Dang, Odaily Planet Daily

Yesterday, Aave community core member Marc Zeller posted on X, stating that when a ecosystem spawns a second token, the combined market capitalization of the two will ultimately be lower than the market capitalization of the original token. For example, when Polygon introduced the Katana Network following POL, it will also launch a new coin, KAT, with the combined market value of the two expected to be lower than POL's value at the time of the Katana plan announcement. This post sparked strong dissatisfaction from Polygon Labs CEO Marc Boiron, leading to a $50,000 bet between the two, wagering on the performance of POL and KAT six months later.

This is not just a bet on market performance but also a questioning of Polygon's multi-coin strategy, ecological governance concept, and even the future direction of DeFi.

Background and Strategic Intent of Polygon's New Coin KAT

The Katana Network is the latest strategic project in the Polygon ecosystem, initiated by the Katana Foundation and co-incubated by Polygon Labs and GSR Markets. The network is positioned as a blockchain dedicated to optimizing the DeFi scene, planning to launch its public mainnet in June 2025, focusing on deeper liquidity integration and more predictable lending rates, aiming to build a more stable and efficient DeFi lending environment.

Accompanying Katana is its native token, KAT. KAT's functions cover two core modules: ecological governance and liquidity incentives. Among them, 15% of the KAT tokens will be distributed to Ethereum POL stakers via airdrop, attempting to achieve linkage between the old and new ecosystems through the original user base, thereby enhancing community stickiness and stabilizing market confidence in Polygon's core asset.

The issuance of KAT is a key part of Polygon's strategic realignment. In June of this year, Polygon's founder Sandeep Nailwal announced that he would personally take on the role of CEO of the foundation, marking a comprehensive takeover of the ecological strategy. He emphasized that Polygon will gradually phase out zkEVM, focusing resources on two directions: one is Polygon PoS, focusing on stablecoin payments and RWA asset integration; the other is AggLayer, aimed at providing incubation, funding, and resource support for project development within its PoS ecosystem, with successful projects airdropping 5% to 15% of their native token's total supply to POL stakers and accessing the AggLayer network. This means that Polygon will return to a sustainable growth path, rather than relying solely on technical stack.

The launch of Katana and KAT in this context is aimed at filling the growing void in the Polygon PoS ecosystem's DeFi pillar, especially after heavyweight protocols such as Aave and Lido successively withdrew, leading to a loss of over $300 million TVL. The launch of KAT has become a crucial step for Polygon to revitalize its ecosystem. Through new coin issuance, airdrop incentives, and dedicated infrastructure development, Polygon hopes to reinvigorate TVL growth momentum, attracting developers and users back to the ecosystem.

From a more macro perspective, Polygon's move is also a response to the Layer 2 ecosystem competition. With solutions like OP Stack and Arbitrum Orbit dominating the scene, Polygon is attempting to differentiate itself through DeFi depth and asset integration capabilities.

The Root Cause of the Aave and Polygon Conflict

The spark of the conflict between Polygon and Aave ignited in December 2024 when Polygon proposed a yield farming plan. The plan aimed to utilize over $1 billion in stablecoin assets bridged to the PoS chain for cross-protocol yield farming.

This proposal sparked strong opposition from the Aave community. Aave's core member, Marc Zeller, believed that Polygon's yield farming approach was too risky and could lead to default issues. Some community members even likened it to the traditional finance model of a "shadow bank," expressing concerns that the undisclosed high-risk operation could threaten fund security.

In response to this Polygon proposal, Zeller put forward a risk parameter adjustment proposal for Aave on the PoS chain: setting the loan-to-value ratio (LTV) of all assets to 0% and increasing the reserve factor to 85%. With overwhelming support of 690,000 votes and 117,000 votes against, Aave announced a gradual withdrawal from the borrowing market on the Polygon PoS chain.

Marc Boiron, CEO of Polygon Labs, expressed strong dissatisfaction, stating that Aave's exit not only restricted the revenue generation potential of the Polygon ecosystem but also could weaken the PoS chain's attractiveness to developers and users. This move might impact the long-term cooperation prospects of both parties, indicating a potential anti-competitive stance.

Subsequently, Aave's co-founder Stani clarified in a post on X, stating that Aave's actions were not against Polygon or impeding its development but rather stemmed from a responsibility for user fund security. He pointed out that Polygon introduced a high-risk proposal without prior communication on the agreed protocol, deviating from DeFi's principles of openness and transparency. Both sides engaged in a fierce clash regarding proposal risks, asset control, and governance boundaries. What appeared as a protocol dispute was fundamentally a collision of governance ideologies and collaboration mechanisms.

Moreover, Lido also announced the termination of its Polygon PoS chain staking service in December 2024, citing reasons such as low user adoption, insufficient incentives, and ecosystem development uncertainty. Users are required to withdraw their funds by June 16, 2025. This move further weakens Polygon PoS chain's DeFi ecosystem.

Meanwhile, Polygon faced an internal trust crisis. Following Jaynti Kanani and Anurag Arjun, the third co-founder, Mihailo Bjelic, announced his withdrawal from the foundation's board. In his statement, he expressed, "As the project evolves, changes in vision and even divergence are natural, and I can no longer contribute to Polygon in the best possible way," revealing internal disagreements over the new strategy.

Epilogue: Behind the Gamble, Lies a Trust Showdown

KAT is not the endpoint for Polygon but a trial to reshape the DeFi narrative.

From an opportunity perspective, Katana Network's advocated liquidity aggregation and predictable interest rate mechanism indeed address the DeFi market's core demands for stable returns and risk control. If successful, KAT will become a new growth engine for the Polygon ecosystem, injecting new vitality into the PoS chain and potentially attracting a new wave of developers.

However, risks are equally evident. The issuance of KAT may dilute the value of the original POL, especially in a situation where the dual-token ecosystem governance mechanism is not yet clear, potentially causing uncertainty among users and developers regarding governance rights and incentive mechanisms, further exacerbating market watchful sentiment.

The attention around this event is not just because of the $50,000 bet but because it reflects the most fragile nerve of the current crypto ecosystem: inter-protocol trust, community governance transparency, and the boundaries of user asset security.

Whether KAT can uphold a new narrative remains to be seen over time. However, what is certain is that the future prosperity of the crypto world is not merely sustained by a surge in market value but is built on the foundation of candid inter-protocol collaboration, open governance, and user trust.

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