On March 3rd, the Aave protocol's core governance team, Aave Chan Initiative (ACI), announced it would cease operations and exit AAVE.
This is the second major contributor to leave within two weeks—previously, on February 20th, the development team behind the Aave V3 codebase, BGD Labs, announced its departure.
Following the announcement, the price of the AAVE token fell by more than 11%.
As one of the most successful DAOs (Decentralized Autonomous Organizations) in DeFi history, this DeFi leader with nearly $27 billion in TVL (Total Value Locked) is undergoing profound internal turmoil.
From Revenue Attribution Dispute to Bundled Voting
The seeds of this crisis were sown as early as last December.
At that time, Aave Labs replaced the front-end transaction aggregator from ParaSwap to CoW Swap without prior governance discussion. The fees that originally flowed to the DAO treasury instead went into Aave Labs' accounts.
Facing质疑 (query/doubt), Aave founder Stani Kulechov responded: the front-end interface was built by Labs, so the revenue naturally belongs to Labs; the smart contracts and liquidity pools belong to the DAO. This explanation was legally sound but caused discontent within the community.
To quell the controversy, Aave Labs proposed a plan called "Aave Will Win" in February. The proposal主要内容 (main content) included: requesting DAO approval for approximately $51 million in funding for V4 development; in exchange, all future revenue from Aave-branded products would be assigned to the DAO, and Aave V4 would be established as the sole technical foundation, gradually phasing out V3.
The problem was that these three matters were bundled together. Support revenue going to the DAO but think the funding amount is too large? No choice. Believe V3 still has value and shouldn't be sidelined?同样没得选 (Similarly, no choice). Either accept the entire package or reject it entirely.
ACI's Grievance: Opaque Voting
In its exit statement, ACI's core accusation was: a significant portion of the votes supporting the proposal came from addresses associated with Aave Labs. A temperature check vote passed by a narrow margin of 52.58%, and ACI believes the result might have been different without these "self-votes".
ACI founder Marc Zeller wrote: "If a major budget recipient can use its undisclosed voting power to force through its own proposals, then independent service providers lose their raison d'être within the DAO."
ACI did try to resolve the issue. Before the vote, it proposed four conditions, including stricter on-chain milestone tracking and restrictions on self-voting by budget recipients, but none were adopted.
This conflict reflects structural problems in DAO governance.
Aave Labs controls the codebase, brand domains, social media, and development discourse. BGD Labs maintains the main version V3—it contributes over 75% of the protocol's revenue and 97% of the total deposits. ACI is responsible for governance coordination and business development, claiming to have driven 61% of governance actions over the past three years, helping Aave's DeFi market share rise from less than 50% to over 65%.
These three teams were supposed to check and balance each other. But with BGD and ACI leaving one after another, the remaining power center, no matter how it表态 (states its position), is difficult to be fully trusted.
Stani Kulechov responded after ACI announced its exit: "Thank you Marc for years of contribution, the protocol will continue to operate normally."
But this response did not address the core issue: when the people most capable of assessing the technical risks of V3 have left, how can the DAO feel confident betting its future on the untested V4?
Another noteworthy detail is that institutional investor Blockchain Capital stated afterwards that they were unable to participate in the snapshot vote with their held AAVE because their custody platform did not support it. This reveals another reality of DAO governance: nominally based on collective decision-making by token holders, voting power is often concentrated in the hands of a few.
DAO's Governance Dilemma
ACI stated that during the four-month transition period, it will transfer or open-source tools and responsibilities such as the governance dashboard, incentive framework, and committee roles. But some things are difficult to transfer: three years of accumulated governance experience, familiarity with protocol details, and the interpersonal network for coordinating different stakeholders.
Data shows that ACI spent $4.6 million from the DAO over the past three years, helping the GHO stablecoin grow from $35 million to $527 million. Who will take over these tasks in the future remains unknown.
This turmoil at Aave is essentially a microcosm of the DAO governance dilemma.
In theory, a DAO is a community of token holders. But in practice, governance is often dominated by the founding team, early investors, and core developers. These roles are both rule-makers, rule-enforcers, and sometimes budget recipients. When conflicts of interest arise, whether "procedural justice" is sufficient becomes the焦点 (focus) of controversy.
A DeFi practitioner commented: "This is not a question of who is right or wrong, but rather that the existing governance mechanisms do not provide an effective way to resolve conflicts when interests and positions diverge."
What Happens Next?
The ARFC (Request for Comments) stage revisions to the "Aave Will Win" proposal will be the first window to observe the direction of events. If the "structural improvements" promised by Kulechov can be implemented, such as unbundling the proposal and clarifying the boundaries of voting behavior, it might draw a line under this turmoil.
If consensus cannot be reached, the most extreme possibility is that BGD and ACI start anew, forking a new protocol. Although liquidity barriers are high, it's not impossible—the simultaneous departure of core developers and the governance team provides both the technical foundation and community basis for a fork.
For Aave, the immediate problem is how to fill the void left by the departure of the two core teams. The longer-term problem is how to find a more sustainable balance between the founder's vision, the interests of core developers, and the will of the community. If the paradox of "power concentration" cannot be resolved, even the strongest protocol may lose its first-mover advantage in endless internal friction.
Author: Bootly
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