Amid the surge in Web3 adoption, a dispute has arisen between two rivals in the aftermath of this technological shift. Gauntlet, AAVE's market risk manager, was discovered to be collaborating with MakerDAO, AAVE's direct competitor.

Gauntlet's departure from Aave has intensified the rivalry between the two decentralized lending platforms. A key difference between them lies in how they determine interest rates: Aave bases its rates on the utilization rate of crypto assets, while MakerDAO allows MKR investors to set interest rates. Additionally, MakerDAO uses DAI as collateral, whereas Aave accepts a broader range of crypto assets for borrowing. Aave also encourages liquidators to address under-collateralization issues by settling debt positions, a process MakerDAO manages through collateral ratios that trigger automatic fund liquidation when thresholds are breached.

In March of this year, Aave's community airdrop excluded users of the Morpho Aave optimizer, a protocol built atop Aave, leading to concerns among DAO members that it diverted funds from the flagship protocol. Marc Zeller, the creator of the Aave Chain Initiative, proposed a 0% loan-to-value ratio for MakerDAO's DAI stablecoin after this incident, potentially restricting DAI's use as collateral and creating a market split. The Aave Chain Initiative, AAVE's primary DAO delegate, is spearheading this proposal as part of AAVE's loyalty premium.

Zeller also raised concerns about a potential rift between MakerDAO and Gauntlet, a move he considers unnecessary for Aave. He believes that establishing a protocol embassy will help the DAO explore collaborative opportunities with other protocols. MakerDAO proposed a plan to divide its balance sheet into USDe and sUSDe tokens provided by Ethena, a stablecoin issuer, initiated by the Spark subDAO, a lending protocol that originated as an Aave fork.

Recently, Spark and Morpho, Aave's non-aligned targets, have established a relationship, potentially facilitating the proposed allocation. Zeller criticized Maker for inadequate management and lack of oversight on the X social networking platform. He submitted his proposal to Aave's governance forum, while Stani Kulechov, AAVE's founder, supported completely removing DAI from all Aave markets.

Sam MacPherson, CEO of Phoenix Labs and Spark contributor, expressed concerns about Aave DAO's plan to set DAI's loan-to-value ratio to 0%. Observers of Aave's conflict with Maker expressed serious concerns about a potential rift between two major players in the DeFi sector. Matt Fiebach, a research analyst at Blockworks, similarly lamented the fragmentation of the decentralized finance (DeFi) sector into siloed ecosystems.