Why is Polygon's new coin KAT not well-received behind the $50,000 bet?

Original | Odaily Daily Report (@OdailyChina)

Author | Dingdang (@XiaMiPP)

Yesterday, Marc Zeller, a core member of the Aave community, posted on X that when an ecosystem derives a second token, the total market capitalization of both will eventually be lower than that of the original token, for example, the Katana Network launched by Polygon after POL will also issue a new coin KAT, and it is expected that the combined market capitalization of the two will be lower than that of POL at the time the Katana plan was announced. This post triggered strong dissatisfaction from Polygon Labs CEO Marc Boiron, leading both parties to bet $50,000 on the market performance of POL and KAT after 6 months.

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

The background and strategic intent of Polygon's new coin KAT

Katana Network is the latest strategic project in the Polygon ecosystem, initiated by the Katana Foundation and jointly incubated by Polygon Labs and GSR Markets. This network is positioned as a private blockchain focused on optimizing DeFi scenarios, with plans to launch a public mainnet in June 2025, featuring deeper liquidity integration and more predictable lending rates, aiming to build a more stable and efficient DeFi lending environment.

Alongside Katana, its native token KAT was also unveiled. The functions of KAT encompass two core modules: ecological governance and liquidity incentives. Among them, 15% of KAT tokens will be distributed to POL stakers on Ethereum in the form of airdrops, attempting to leverage the existing user base to link the old and new ecosystems, thereby enhancing community stickiness and stabilizing market confidence in Polygon's core assets.

The issuance of KAT is an important part of Polygon's strategic restructuring. In June this year, Polygon 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 and focus resources on two directions: the first is Polygon PoS, which emphasizes stablecoin payments and RWA asset integration; the second is AggLayer, aimed at providing incubation, funding, and resource support for project development within its PoS ecosystem. Successful projects will airdrop 5% to 15% of their total native token supply to POL stakers and connect to the Agglayer network. This means that Polygon will return to a sustainable growth path, rather than relying solely on technology stacking.

Katana and KAT are launched in this context to supplement the increasingly thin DeFi pillars within the Polygon PoS ecosystem, especially after heavyweight protocols such as Aave and Lido withdrew in succession, resulting in a loss of over $300 million in TVL. The launch of KAT has become an important measure for revitalizing the Polygon ecosystem. Through new coin issuance, airdrop incentives, and dedicated infrastructure construction, Polygon aims to reactivate TVL growth momentum and attract developers and users back to the ecosystem.

Looking at it more broadly, Polygon's move is also a response to the competition in the Layer 2 ecosystem. Under the dominance of modular solutions like OP Stack and Arbitrum Orbit, Polygon is trying to carve out a differentiated path with its DeFi depth and asset integration capabilities.

The Root of the Conflict Between Aave and Polygon

The trigger for the conflict between Polygon and Aave erupted in December 2024, when Polygon proposed a yield-generating proposal aimed at utilizing over $1 billion in stablecoin assets bridged to the PoS chain for cross-protocol yield farming.

This proposal has sparked intense opposition within the Aave community. Core member Marc Zeller believes that the yield generation model of Polygon is too risky and could lead to bad debt issues. Some community members even liken it to the "shadow banking" model of traditional finance, arguing that high-risk operations conducted without sufficient disclosure could threaten the safety of funds.

In response to Polygon's proposal, Zeller put forward a risk parameter adjustment proposal on the Aave PoS chain: setting the loan-to-value ratio (LTV) of all assets to 0% and raising the reserve ratio to 85%. The proposal passed with an overwhelming result of 690,000 votes in favor and 117,000 votes against, Aave announced a gradual withdrawal from the lending market on the Polygon PoS chain.

Polygon Labs CEO Marc Boiron expressed strong discontent, believing that Aave's exit not only limits the potential for revenue generation within the Polygon ecosystem but may also weaken the appeal of PoS chains to developers and users, affecting the long-term cooperation prospects for both parties, and even showing signs of anti-competitive tendencies.

Subsequently, Aave co-founder Stani clarified in a post on X that Aave's actions were not against Polygon or hindering its development, but rather a responsibility towards the safety of user funds. He pointed out that Polygon introduced high-risk proposals without communicating with the partnership agreement, deviating from the principles of openness and transparency that DeFi should uphold, and failed to provide effective safeguards against potential bad debts. The two parties engaged in intense confrontations over the risks of the proposals, asset control, and the boundaries of governance power. On the surface, it is a dispute over the protocol, but in essence, it is a clash of governance philosophies and cooperation mechanisms.

Moreover, Lido also announced the termination of the Polygon PoS chain staking service in December 2024, citing reasons such as low user adoption, insufficient incentives, and uncertainty in ecological development. Users need to withdraw their funds before June 16, 2025. This move further undermines the DeFi ecosystem of the Polygon PoS chain.

Meanwhile, a trust crisis has also emerged within Polygon. Following Jaynti Kanani and Anurag Arjun, the third co-founder, Mihailo Bjelic, announced his resignation from the foundation's board. In his statement, he said, "As the project develops, it is natural for visions to change and even diverge. I can no longer contribute to Polygon in the best way," indicating differing opinions on the new strategy within the organization.

Conclusion: Behind the gamble is a contest of trust.

KAT is not the endpoint of Polygon, but a trial in reshaping the DeFi narrative.

From an opportunity perspective, the liquidity integration and predictable interest rate mechanism advocated by Katana Network indeed addresses the core demands of the current DeFi market 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 is also expected to attract a new round of developers.

But the risks are equally evident. The issuance of KAT may dilute the value of the original POL, especially in the case where the dual-token ecological governance mechanism is not yet clear, which could create uncertainty for users and developers regarding governance rights and incentive mechanisms, further intensifying market hesitation.

The reason this event has garnered attention is not merely because of the $50,000 bet, but rather because it reflects the most fragile nerves of the current crypto ecosystem: inter-protocol trust, transparency in community governance, and the boundaries of user asset security.

Whether KAT can uphold the new narrative remains to be seen. However, it is certain that the future prosperity of the crypto world cannot rely solely on market capitalization increases, but rather on a foundation of honest collaboration between protocols, transparent governance, and user trust.