Editor's Note: After a phase of regulatory risks subsided, Aave faced an even more challenging test in governance. On February 13, Aave Labs released a new governance proposal, committing to transfer 100% of Aave-branded product revenue to the DAO and promoting V4 as the future technical core of the protocol. This is seen as a direct response to the community disputes over the past few months.

However, reviewing the event's progression reveals that the core of the dispute is not just a one-time revenue redistribution but a concentrated eruption of long-standing tensions around revenue ownership, brand ownership, and the boundaries of governance power. From the trust crisis triggered by front-end product changes to concerns about whale sell-offs, founder buybacks, and allegations of manipulated governance, this conflict exposes structural issues between the development team and the DAO that have not yet been institutionally resolved.

Related Reading: "Token vs. Equity: The Ins and Outs of the Aave Dispute"

This article attempts to outline how this governance conflict escalated and examines which key demands the current response addresses, as well as which issues remain unresolved. The Aave controversy continues, but it has already provided the entire crypto industry with a highly realistic governance case study.

Author's Note: The author of this article is the founder of Aave Chan Initiative (ACI). ACI is a delegation platform for Aave DAO and also one of its service providers.

Below is the original text:

This proposal is, in essence, a phased victory for Aave DAO governance.

Last December, a truly independent delegate, @EzR3aL, raised questions about revenue attribution, sparking a series of community discussions around revenue alignment mechanisms, governance transparency, and the boundary of the relationship between Aave Labs and the protocol. To date, Aave Labs' response includes: directing 100% of Aave-branded product revenue to the DAO treasury, confirming V4 as the unified technical foundation, and establishing a foundation to hold the brand and IP.

These changes did not occur naturally but are the result of sustained pressure. In other words, this is governance in action.

The direction is correct. I have long publicly advocated for this token-centric alignment path. The goal is not off track, but the current proposal still requires clarification and adjustments in its execution. Before voting, the community must fully understand the key details.

First, Examine the "Fine Print"

The core statement of the proposal is: "100% of Aave-branded product revenue belongs to the DAO." This is a clear, positive commitment and proof that decentralized governance can yield real-world results. However, governance requires strict scrutiny of the terms.

The Definition of "100% Revenue" Should Not Be Solely in Labs' Hands

In the proposal text, "revenue" is defined as: total product revenue, minus partner shares, revenue returns, subsidies, and additional direct user incentives.

The problem is that all these deductions are at the sole discretion of Aave Labs: there is no independent audit, no clear cap, and no requirement for DAO approval before or after.

The proposal also states: Aave Labs retains the right to directly use part of the product's cash flow (such as treasury yields) for user incentives.

"100% revenue" is a highly symbolic statement, but the definition of revenue must be in the hands of the DAO, not the recipient of the funds.
If an independent third-party audit is introduced, and a DAO-approved cap mechanism is set for discretionary deductions, this commitment can transform from a slogan into an executable, verifiable institutional arrangement.

This is a technically minor but institutionally significant adjustment.

The Current Treasury Size Cannot Sustain Such a Large One-Time Allocation

As of now, the Aave DAO treasury size is approximately $160.9 million, with a decrease of about $44.8 million last month due to market fluctuations. In terms of asset structure, about $100.6 million is in non-AAVE assets, and $60.2 million is in AAVE tokens.

This proposal requests: $42.5 million in stablecoins ($25 million main allocation + $17.5 million milestone allocation); 75,000 AAVE tokens.

The stablecoin portion alone accounts for 42% of the DAO's non-AAVE reserves; the total requested amount is approximately $50.7 million, equivalent to 31.5% of the entire treasury size.

This is a highly concentrated fund request for a single service provider, approved through a single vote. Without enforceable constraints and transparent disclosure, no fund or token transfer should occur.

Aave's Cash Flow Foundation Comes from V3

Aave V3 currently generates over $100 million in annualized protocol revenue, making it one of the most mature and stable lending infrastructures in DeFi.
Historically, over 95% of Aave DAO's cumulative revenue has come from V3 and its predecessors.

However, the proposal positions V3 as "approaching architectural limits" and promotes V4 as the overall replacement at the governance level. Simultaneously, the maintenance plan explicitly states: if this framework passes, it is reasonable to suspend adding new features to V3.

V4 may represent the long-term direction, but we must face the fact: it is still in the testnet phase, has only undergone partial audits, and has not generated any actual revenue.
A more prudent path would be dual-track advancement: continue protecting V3, the $100 million annual cash flow engine, while accelerating independent verification of V4.

Bundling "confirming a protocol that has not yet launched" with "freezing a mature revenue source" into a single vote is clearly too radical.
V4's governance confirmation should be based on its own maturity and mainnet launch status, through an independent proposal.

Voting Items Should Not Be Forcibly Bundled

The FAQ mentions: splitting related items into separate votes could lead to fragmented plans that are difficult to execute.

But from a governance perspective, this is a bundle of four independent decisions: revenue alignment mechanism; V4 governance confirmation; foundation establishment; over $50 million fund request.

Their risk attributes and consensus bases are not the same.

The community has broad consensus on revenue alignment; it may also support the direction of V4 and the foundation; but there are significant disagreements on the fund size, pace, and constraints.

Bundled voting means "all or nothing." If each part stands on its own, the community should be allowed to express opinions and make amendments separately.

75,000 AAVE Tokens Essentially Represent a Transfer of Governance Power

At the current price of approximately $109, 75,000 AAVE tokens are worth about $8.2 million, equivalent to 13.6% of the DAO's current AAVE holdings (about 550,000 tokens).

And AAVE tokens themselves represent voting power.

Previously, I published on-chain analysis showing that wallets associated with Aave Labs infrastructure participated in voting against the "mandatory disclosure" proposal (which required wallet disclosure and conflict-of-interest recusal). That vote is still ongoing, with the supporting side at a disadvantage.

Against this backdrop, the proposal asks the DAO to transfer an additional 75,000 AAVE to an entity whose governance holdings have not been disclosed, clearly creating information asymmetry.
Before further transferring governance power, the DAO must fully understand the voting influence already held by the recipient.

What I Support, and What I Reserve

I support the overall direction of this proposal: revenue alignment is correct; having the foundation hold the brand and IP is reasonable; V4 as a long-term technical path has a logical basis; the DAO should recognize this fact: sustained, rational governance intervention is producing real results.

But direction is not execution, and a Temperature Check should not be seen as a blank check.

Four Things to Complete First

I recommend completing the following steps before proceeding with any substantive fund transfers:

Split the Vote
Revenue alignment, V4 confirmation, foundation establishment, and fund requests should be reviewed as separate proposals.

Ensure the Foundation Is Truly Independent
Before any fund transfer, an independent foundation holding all Aave IP, trademarks, and brand rights should be established and verified.
"Independent" should be reflected in the board structure and governance mechanisms, not just in legal documents.

Complete Wallet and Governance Disclosure
Any entity receiving DAO funds and AAVE tokens should disclose all wallets it directly or indirectly controls. This standard should apply equally to all service providers.

Introduce an Independent Revenue Verification Mechanism
The so-called "100% revenue" should be defined and verified by an independent auditing body, with related deductions requiring caps or DAO approval.

These requirements are not a rejection of the proposal but are meant to make it executable and credible. If these arrangements are already planned, explicitly including them in the Temperature Check would only enhance community confidence.

Once these conditions are met, the DAO can rationally evaluate the funding plan under transparent, verifiable conditions.

This is a commendable day for Aave governance. The community pushed for alignment and received a response.

The next step is to ensure this response is real, executable, and fair to all token holders.