AAVE Governance Fight Turns Public: DAO vs. Aave Labs

The Labs Side Fires Back

Aave Labs responded by arguing that the situation was misunderstood. According to the team:

• The DAO controls the smart contracts
• Aave Labs owns and operates the front-end interface
• The revenue from CoW Swap was a “surplus” that Labs had previously shared voluntarily
• Hosting, infrastructure, and developer salaries are paid by Labs, not the DAO

They claimed that maintaining control over the interface, branding, and revenue sources was essential for fast product development. Complete DAO control, they warned, would make Aave slower and less innovative.

A Vote, a Backlash, and a Selloff

In an attempt to resolve the conflict, Aave Labs initiated a Snapshot vote on December 23. The proposal would grant AAVE token holders official ownership of Aave’s brand assets, including the name, logo, domains, and social media handles.

However, the vote caused even more controversy.

The proposal was based on a draft by Ernesto Boado, former CTO of Aave Labs. But Boado claimed he never approved the final version and had not agreed to a vote yet. He called the move “disgraceful” and asked the community to abstain from voting.

Marc Zeller also criticized the timing. He said the vote was rushed during the holiday season and that new delegates with fresh voting power were being used to influence the outcome.

Market Impact

The controversy has already affected the $AAVE token. On December 22, the token price fell by 11%, dropping from around $180 to $160. Trading volume spiked as panic set in.

Adding to the selloff, a major whale dumped 230,000 $AAVE tokens, worth around $37.6 million. The sale was split between stETH and WBTC, worsening the market pressure.

Despite this, Aave remains a dominant player in DeFi. The protocol still generates more than $140 million in annual revenue and controls roughly 87% of the DeFi lending market.

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Bigger Questions: Who Owns a Protocol?

This situation is more than just a dispute over fees. It raises fundamental questions about how DeFi protocols operate.

• Who owns the user interface of a decentralized protocol?
• Should the team that builds the tools control the brand?
• Or should the DAO control everything, including websites, revenue, and trademarks?

The Aave community is now debating these questions openly. Some members are pushing for a fully DAO-controlled model. Others believe the protocol needs a strong central team to remain competitive.

This is not the first time a protocol has faced these issues. Similar debates have occurred in other DAOs like Uniswap. But Aave’s scale and market share make this fight especially important.

Src: X (JoestarCrypto)

What’s Next?

The Snapshot vote is live. Early numbers show that it may not pass, but results are still coming in.

Meanwhile, discussions continue on social media and governance forums. Some users propose new votes to reclaim revenue or brand rights. Others suggest mediation between Aave Labs and DAO leaders.

In the background, Aave Labs continues building. Aave V4 and the Horizon mobile app are still in development, though critics worry that their revenues could also bypass the DAO.