The Aave Labs-DAO ceasefire in January is being tested. Aave Labs, one of the ecosystem service providers (SPs), announced an “Aave will win” framework to direct 100% product revenue to the DAO.
According to the proposal, revenue generated from all Aave-branded products, including Aave.com, Aave mobile app, Aave Card, and Aave Horizon (a tokenization platform), amongst others, will be channeled to the DAO.
For his part, Aave Labs CEO and founder Stani Kulechov said,
“The framework formalizes Aave Labs’ role as a long-term contributor to the Aave DAO under a token-centric model, with 100% of product revenue directed to the DAO.”
As DeFi and TradFi merge, Kulechov added that “this framework positions Aave to capture major growth markets and win over the next decade.”
In return, Aave Labs has requested $50 million, including 75,000 AAVE coins, from the DAO to fund development of these products. It argued that the revenue streams it currently relies on to do the work would be directed to the DAO.
Additionally, the SP proposed the formation of a Foundation to handle and manage Aave brands, arguing that the DAO isn’t a legal entity capable of undertaking such a responsibility.
DAO slams Aave Labs proposal as ‘extraction’
For the unfamiliar, the DAO is the collective governing entity representing tokenholders and tasked with directing and funding ecosystem developments carried out by SPs.
The governance spat between the two entities spiraled in late 2025 following accusations that Aave Labs stole DAO revenues for personal use. Additionally, the DAO demanded control over all Aave brands, claiming that Aave Labs had sidestepped it.
At that time, AAVE token’s price dropped from $200 to nearly $140, wiping significant market value as the crisis deepened. However, relief came after a ceasefire in January, when Aave Labs promised a proposal aligned with token holders.
Alas, the DAO, led by vocal member Marc Zeller, remains unhappy with Aave Labs’ demands and certain aspects of the proposal.
In a statement, Zeller said the proposal was a win for the DAO but retorted,
“Aave Labs is back with a $50M ‘solution’, presented as ‘for the good of the DAO’, after zero prior coordination with delegates or service providers. At this point, the fox controls the henhouse, and the incentive is clearly to maximize extraction.”
He asked for further clarification and an audit on Aave Labs’ income streams to verify the “100% revenue” commitment.
In other words, the governance issue may still be far from being resolved. For its part, AAVE surged by about 7% after the update. However, if the governance crisis escalates again, it could drop to $79 or lower.
Final Thoughts
- Aave Labs has agreed to direct 100% of product revenue from Aave-related brands back to the DAO.
- However, the DAO disagreed with Aave Labs’ $50 million demand, signaling that the governance crisis may continue.
