AAVE, the leading decentralized lending protocol in the DeFi market, is entering a restructuring phase that could profoundly alter the ownership structure, revenue model, and governance mechanisms of the entire ecosystem. AAVE Labs recently proposed transferring 100% of revenue from AAVE -branded products to the AAVE DAO treasury, a move XEM as an attempt to ease months of tension between the profit-oriented R&D company and the Token-holding community.
In a non-binding "temperature check," AAVE Labs proposed a framework called the "AAVE Will Win Framework," with the central message being to reposition Token holders as the primary beneficiaries of the entire protocol operation. Under this proposal, all swap fees from AAVE V3 , the upcoming upgraded version AAVE V4 , revenue from the AAVE interface, as well as new business segments such as AAVE Card, AAVE App, AAVE Pro, and even future AAVE related ETF plans, would be entirely transferred to the DAO treasury. Simultaneously, a new fund called the AAVE Foundation was proposed to hold the brand and intellectual property assets.
This proposal emerged after a period of intense debate within the community over the core question: Who truly owns AAVE? Is it the DAO – the decentralized entity that has run the protocol since the Governance Token launched, or AAVE Labs – the startup that built the brand and the platform initially? The conflict escalated last December when AAVE Labs redirected swap fees from the official interface – which had previously flowed into the DAO treasury – to a private wallet controlled by the company. In response, a holder proposed a “poison pill” scheme to acquire intellectual property and make the company a subsidiary of the DAO, but this proposal failed to pass the governance vote.
Under that pressure, CEO Stani Kulechov opened discussions about a new revenue- Chia mechanism and brand. Simultaneously, AAVE Labs also underwent a major restructuring, scaling back projects outside of the lending segment previously developed under the Avara brand, selling its Decentralized Social Media protocol, and gradually closing the Family wallet to focus entirely on DeFi – the core area that has helped AAVE become one of the lending protocols with the largest TVL in the market.
The strategic focus for the next phase is AAVE V4 – a version that has been under development for many years and is expected to open up new revenue streams that the old architecture struggled to implement. According to AAVE Labs, V4 will adopt a “hub and spoke” model, allowing the protocol to expand to separate markets and Use Case , with independent risk parameters and revenue models. This is XEM a crucial step for AAVE to compete in the increasingly fierce lending market, especially as competitors like Compound and MakerDAO are also pushing to reform their tokenomics and revenue distribution models. AAVE V3 alone is said to have generated over $100 million in annual revenue, demonstrating the significant economic scale of this ecosystem.
However, the biggest point of contention wasn't the transfer of all revenue to the DAO, but the accompanying funding requirement. In exchange for abandoning the self-financing model, AAVE Labs proposed that the DAO provide approximately $25 million in operating funds in stablecoins, along with 75,000 AAVE vesting linearly over two years, plus separate grants for new products such as the AAVE App, AAVE Pro, and AAVE Card. Part of the budget would be paid upfront, with the remainder disbursed over time, subject to annual budget approval votes.
According to AAVE Labs' argument, for many years the company has self- Capital the development of its product layer, only requiring DAO support for the core protocol and key marketing. Looking ahead 10 years, they believe greater resources are needed to maintain their leading position in DeFi, especially as traditional financial institutions gradually enter the digital asset market, and the global regulatory environment becomes clearer after the 2022–2023 regulatory cycle.
