Author: Jae, PANews
When DeFi's governance benchmark collides with real-world commercial interests, a brutal game determining "who is the master" is unfolding within the leading lending protocol, Aave.
As a leader in the DeFi market, Aave not only manages approximately $34 billion in assets but is also regarded as a model of on-chain governance. In December 2025, however, Aave found itself in the most severe crisis of confidence in its eight-year history.
This controversy did not arise by chance. The initial trigger was a seemingly insignificant front-end fee allocation, but it unexpectedly set off a domino effect. Catalyzed layer by layer through a series of key events, it ultimately pushed the lending giant Aave into the spotlight.
This is more than just a dispute over profit distribution; it has torn open a gap, exposing the most fundamental and sensitive conflict in the DeFi space: under the narrative, who has the final say—the founding team, who controls the code and the brand, or the DAO community, which holds the governance tokens?
This is not just a crisis for Aave; this event poses an urgent question to the entire DeFi market: as protocols mature, how can the commercial incentives for development teams be balanced with the governance rights of token holders?
$10 Million "Vanish," Aave Labs Accused of Depriving Community Rights
The source of Aave's internal governance war began with an update at the technical optimization level.
On December 4, 2025, Aave Labs announced that it was switching the asset swap service provider on its official frontend (app.aave.com) from ParaSwap to CoWSwap, citing better prices and MEV protection.
However, the ensuing financial changes were not fully disclosed in the announcement. Community representative EzR3aL discovered through on-chain data tracking that the fees generated by user transactions, after the change, no longer flowed to the DAO's public treasury but were instead transferred to an address controlled by Labs. Based on historical data estimates, this missing annualized revenue would amount to $10 million.
Aave community leader Marc Zeller pointed out: This is an invisible privatization of brand assets. Labs is using the technology and brand value developed with DAO funding to profit itself, breaking a long-standing trust agreement.
Aave founder Stani Kulechov, however, argued: This is a distinction between the protocol and the product. He explained that the Aave protocol, built by smart contracts, belongs to the DAO, while the commercial rights to the frontend product app.aave.com, which requires high operating and maintenance costs, should belong to the builders, Labs. The fees previously flowing to the DAO were merely "voluntary donations." This view challenges the traditional DeFi community belief that tokens should capture all economic value generated by the protocol's ecosystem.
To the community, Stani's logic is tantamount to a deprivation of sovereignty. The frontend, as the most important user entry point and traffic gate, if its revenue can be unilaterally intercepted by Labs, will similar revenue interception occur in future projects like Aave V4, the GHO stablecoin, and Horizon RWA? In this scenario, the value capture promise carried by the governance token AAVE risks becoming an empty promise.
Related reading: Annual Loss of Tens of Millions in Revenue Sparks Governance Controversy, Aave Labs Accused of "Stabbing the DAO in the Back"
Internal Conflict Heats Up, DAO Proposal Seeks to Reclaim Brand Ownership
When gentle negotiations failed to reach an agreement, radical factions within the community began adopting extreme博弈 strategies. On December 15, a governance proposal named the "Poison Pill Plan" was put forward by user tulipking, making three highly aggressive demands:
- Forced Asset Transfer: Require Labs to unconditionally transfer all code repositories, intellectual property (IP), and trademarks to the DAO, or face legal action.
- Equity Confiscation and Subsidiary Status: Advocate that the DAO should obtain 100% of Labs' equity, turning the originally independent company into a wholly-owned subsidiary of the DAO, with founders and employees becoming employees of the DAO.
- Recovery of Past Profits: Recover all historical frontend revenue generated from the use of the Aave brand from Labs and return it to the treasury.
This bombshell was temporarily shelved due to procedural issues, but its deterrent intent was achieved, demonstrating that the community has the ability and willingness to use governance votes to reversely吞并 a development team that refuses to cooperate.
Under the shadow of the extreme proposal, Aave's former CTO Ernesto Boado proposed a more constructive proposal, "Phase 1 - Ownership," sounding the horn for the sovereignty recovery operation: reclaim domains like aave.com; reclaim control of official social media accounts like X and Discord; reclaim control of the GitHub code repository.
Boado stated bluntly, True decentralization must include the decentralization of "soft assets." He proposed establishing a legal entity controlled by the DAO to hold these brand assets, thereby gaining recourse rights within traditional legal jurisdictions. This marks the DAO's attempt to evolve from a loose on-chain voting organization into a "digital sovereign entity" with actual legal definition and assets.
Token Price Falls, Whales Cut Losses and Exit, Labs Unilaterally Advances Vote Sparking Discontent
When governance is bogged down in internal strife, the secondary market votes with its feet. Although the protocol's locked $34 billion in assets showed no significant fluctuations, the price of the AAVE token, directly related to the interests of holders, fell continuously by over 25% in two weeks.
On December 22, the second-largest AAVE holder cut its losses and exited. It had accumulated 230,000 AAVE tokens at an average price of around $223 but liquidated its position at approximately $165 amid the governance chaos, resulting in an estimated paper loss of $13.45 million. The whale's departure is a negative statement on Aave's current governance chaos and a deep skepticism about its future value capture ability: if revenue can be easily stripped away, the token's past valuation model will also become invalid.
Adding insult to injury, Labs unilaterally advanced the proposal to the Snapshot voting stage without the original author Boado's consent, causing strong protests from the community. Multiple representatives criticized this move as violating normal governance procedures.
Crypto KOL 0xTodd pointed out two problems: 1) The voting date was set for December 23-26, during the Christmas holiday period when many users are on vacation, potentially leading to reduced voting participation; 2) Currently, Boado's proposal is still in the discussion phase. Typically, a discussion post requires 3-6 months of repeated communication and optimization before entering the voting stage.
But Stani replied that the new ARFC proposal vote fully complies with the governance framework, and voting is the best way to solve the problem and the ultimate form of governance. This shows a divergence between the DAO's focus on procedural correctness and Labs' focus on result-oriented efficiency.
On the other hand, absolute procedural correctness could also stifle efficiency. If the development team's commercial returns are completely剥夺, Labs' motivation to promote the protocol's V4 upgrade will significantly decrease. If the brand is managed by the DAO, and it encounters legal disputes, the lack of a directly responsible person could lead to difficulties in rapid response, potentially resulting in the brand being directly seized by regulators.
As of now,赞成票仅占3%,呈现一边倒的局势. The community may enter the "proposal—vote" process again,甚至恶化为一个死循环. In fact, Aave has already wasted a significant amount of time while stuck in this governance deadlock.
However, this crisis of confidence is likely only a阶段性 problem, and a necessary "rite of passage" for Aave as a DeFi leader.
Many seasoned DAO participants stated that even a governance benchmark like Aave is濒临分裂, perhaps the DAO governance model itself is not feasible. But the fact that such a transparent, intense, and evenly matched debate can occur within Aave itself proves its extremely high degree of decentralized governance. This collective correction ability is precisely the value of decentralized governance.
A more critical turning point came from external regulation. On December 20, the U.S. SEC ended a four-year investigation without taking any enforcement action against Aave. This was widely interpreted as regulatory默许 for highly decentralized governance models like Aave's.
Amid the storm, Aave's fundamentals remain highly resilient. Founder Stani not only continued to respond to质疑, personally increasing his holdings by a total of $15 million in AAVE (suffering over $2 million in paper losses), but also announced a "Three Pillars" strategy to rebuild community consensus and trust. However, Stani's move was also questioned by the community, seen as an attempt to increase his own voting power. Even so, simply increasing Labs' influence in governance is still a temporary solution, not a fundamental cure.
Governance Evolution, Hybrid Organization May Become Path to Restructuring Interests
As the风波 evolves, a path of governance evolution may emerge: Aave might transform from a single on-chain protocol into a "hybrid organization."
Returning to the content of the latest proposal itself, the model proposed by Boado essentially redefines the relationship between the two parties in three aspects.
- DAO Owns Sovereignty: Not only owns the smart contracts, but also the brand, domains, trademarks, and user distribution channels;
- Labs as a Professional Service Provider: Labs no longer profits as an "owner," but as a top-tier service provider authorized by the DAO. The fees Labs charges on the frontend should be based on DAO authorization and may need to determine a sharing ratio with the DAO to cover development costs and feed back into the token's value;
- Contractual Governance: All profit distribution is no longer based on "voluntary donations" but on on-chain service agreements.
In fact, this controversy is highly similar to the 2023 incident where Uniswap Labs charging frontend fees caused community dissatisfaction. Ultimately, Uniswap reached an agreement with the community by defining Labs' commercialization rights and the decentralization of the protocol layer.
Aave may go a step further. It attempts to solve the problem of "who is the brand owner" at its legal root through the "Phase 1 - Ownership" proposal. If the proposal passes in the future, any commercialization move by Labs must receive DAO approval at the procedural level, which would fundamentally end the possibility of "invisible privatization."
Aave's dilemma is a universal contradiction faced by all decentralized protocols. Does the market want an efficient but potentially centralized "product," or a decentralized but potentially inefficient "protocol"? This not only concerns the permission boundaries of governance tokens but also determines the evolution direction of DeFi.
Currently, this $30+ billion DeFi experiment is at a crossroads, and its future direction will be slowly revealed through each on-chain vote.
