Written by Glendon, Techub News
The governance storm at Aave has lasted for over two weeks and continues to escalate, becoming a major governance event in DeFi and the entire crypto industry. The debate over whether Aave Labs or the DAO can control Aave's sovereignty has transcended mere fees and brand considerations, prompting deep reflection within the industry on the limits of decentralized governance. So, to what extent has this governance dispute progressed?
Aave Labs vs. DAO Sovereignty Dispute
Before delving into the latest developments in this governance event, let's briefly review its background:
- Aave Labs is the developer of the Aave protocol and the builder of core products, responsible for the front-end interface, new feature development, and technology upgrades; Aave DAO is a decentralized governance organization that can decide major matters such as protocol parameters, interest rates, fund allocation, and development direction through voting.
- On December 4th, Aave Labs partnered with CoW Swap, which will replace Paraswap as the default redemption integration tool on the aave.com platform. This move became the catalyst for a series of subsequent controversies.
- On December 11, EzR3 aL, a representative of the Orbit protocol, posted on the governance forum, questioning whether Aave Labs was "privatizing" the protocol's value. He pointed out that Aave's move to replace CoW Swap would cause the Aave DAO to lose at least $10 million in revenue annually. Meanwhile, Marc Zeller, a former core member of AAVE and founder of ACI, also stated that the CoWSwap solver relies on external free flash loan, bypassing Aave's infrastructure, further reducing DAO revenue.
- Aave Labs refuted this, stating that the Aave interface is operated by Aave Labs and is completely independent of the protocol managed by the DAO. They clarified that they never promised to share adapter surplus fees with the DAO, and the previous revenue sharing was merely a generous donation from Labs. Furthermore, Aave Labs emphasized that the DAO's responsibility is to manage the smart contracts and on-chain parameters of the Aave protocol, but not to manage the brand. The brand and interface belong to Labs.
- On December 16th, the situation escalated further. Ernesto Boado, former CTO of Aave and co-founder of BGD Labs, officially released the ARFC proposal "Transferring Brand Asset Control to Token Holders" on the Aave community. The proposal includes clearly defining the ownership, usage rights, and related terms of Aave's brand assets and intellectual property (covering domain names, social media accounts, naming rights, etc.), and granting the DAO control over them. On the same day, Aave DAO participant "tulipking" proposed an Aave Improvement Plan (AIP): a "poison pill plan." He suggested that the DAO adopt this plan to acquire Aave Labs, gain full control of the latter's intellectual property (including its released code and brand trademarks) and company equity, and reclaim all revenue that Labs previously earned using the Aave brand.
From the above timeline, we can roughly understand the escalation of the conflict, at which point the Aave governance storm has fully materialized. (For details, please refer to: "US SEC concludes four-year investigation, Aave DAO and Labs vie for sovereignty, what has Aave experienced recently?")
Following this, the two sides reached a stalemate. On December 23, Marc Zeller reiterated his views. He pointed out that the Aave DAO, not Avara (the parent company of the Aave protocol), is the true driving force behind the protocol's operation. Over the past three years, core tasks including risk management, technology upgrades, and ecosystem expansion have been handled by DAO's service providers, generating substantial and continuous revenue for the protocol. Many of the personnel and teams that have contributed to Aave's operational success now work within the DAO, not within Avara. Zeller emphasized that if strategic brand assets such as domain names and trademarks remain unilaterally controlled by private companies, it will not only weaken the DAO's governance but also potentially harm ecosystem fairness and talent retention, ultimately jeopardizing the very foundation of the protocol's development in the long run.
Zeller believes that both Avara and the DAO are functioning properly and offers a solution: ownership of strategic brand assets should belong to an entity controlled by the DAO. Management can be delegated back to Avara under a clear and enforceable mandate. Monetization should be defined and negotiated by the DAO from an ownership perspective, providing fair terms for all stakeholders.
Internal strife escalates
During this period, Aave founder and CEO Stani Kulechov did not engage in much debate. Instead, he directly initiated a snapshot vote on the ARFC proposal to "transfer brand asset control to token holders," with the voting period from 10:40 AM on December 23 to 10:40 AM on December 26. He tweeted that the ARFC proposal vote was completely legal, that discussions had taken place over the past five days, and that a timeline for the ARFC proposal had been established. He also stated that the snapshot met the requirements of the governance framework. He emphasized, "People are tired of endless discussions; voting is the best way to resolve conflicts and achieve final governance."
From a supporter's perspective, Stani Kulechov's move aims to end the controversy as quickly as possible, preventing a stalemate that could negatively impact the stability and development of the protocol. After all, AAVE's price has now fallen to $150, a drop of over 27% since December 11, due to the combined impact of crypto market volatility and this controversy.
However, from the perspective of opponents, they believe that Stani Kulechov's apparent respect for the proposal and voting process is actually an attempt to seize power. Hyperliquid trader "Borg" strongly condemned the move in a tweet, stating that his actions severely undermined a healthy governance process—after days of silence, he suddenly attempted to hastily launch a vote during the Christmas season to forcibly seize power. Others countered that the legitimacy of a proposal vote stems from the entire process, not just the result. The fact that the voting period lasted only three days is absurd and runs counter to the interests of token holders.
It's worth noting that Stani Kulechov's recent $10 million purchase of AAVE tokens has also been questioned as "manipulating governance with capital." Many in the crypto community believe that large token purchases could have a substantial impact on the voting results of high-risk proposals.
In response, Ernesto Boado, the initiator of the ARFC proposal, stated that, in essence, this was not his proposal. Aave Labs, for reasons unknown, unilaterally and hastily submitted the proposal to a vote, bearing his name on it without prior notification. He added that he would never have approved it had he been consulted.
He emphasized, "My intention was not to submit a vote while the community was still actively discussing this issue and valuable viewpoints were emerging. This would undoubtedly be a blatant violation of the principle of trust between the community and the people. The purpose of public governance is open discussion, even when it is fraught with difficulties. Labs' attempt to rush into a vote is shameful." He suggested that the community abstain or not participate. Marc Zeller immediately responded, "We have decided to abstain and hope the community will make the same choice."
Currently, snapshot data shows that 53.12% of voters (approximately 801,800 AAVE) have explicitly stated their opposition to the proposal; 42.73% (approximately 644,800) of voters have abstained; and only 4.15% of voters (approximately 62,600 AAVE) have expressed their support for the proposal.
At the same time, this vote once again exposed the problem of highly centralized voting rights at Aave: a small group of major shareholders firmly control more than half of the total voting rights. As can be seen from the chart above, the top five addresses collectively control more than 62% of the voting rights. From an outcome-oriented perspective, the rejection of this proposal seems inevitable, which may be exactly what Aave Labs expected.
However, the proposal failed to pass. Does this mean that the governance controversy surrounding Aave will come to an end?
On the contrary, Aave Labs' actions have not only failed to quell the controversy, but have actually intensified the discussion. Ernesto Boado has previously explicitly rejected the proposal, stating that the final proposal will only be submitted after thorough community discussion. This means that the dispute is likely to escalate further, and could even evolve into a "revolution."
Today, the impact of the Aave governance controversy extends far beyond the scope of a single protocol, serving as a mirror for the industry to examine the feasibility of decentralized governance. It reminds us that even in the DeFi space, where "code is law," a well-defined, reasonable, and efficient governance process is indispensable. Regardless of the outcome of the Aave incident, this storm will leave a legacy, becoming a landmark case study in the decentralized governance of crypto projects.
