Aave Labs hastily initiates governance proposal voting, internal conflicts escalate, and the controversy may evolve into a "revolution"

Written by: Glendon, Techub News

Aave’s governance storm has lasted over two weeks and continues to escalate, becoming a highly watched governance event in DeFi and the entire crypto industry. The debate over who should control Aave’s sovereignty—Aave Labs or the DAO—has moved beyond issues of fees and branding, sparking deep industry reflection on the limits of decentralized governance. So, what is the current state of this governance controversy?

Aave Labs vs. DAO Sovereignty Dispute

Before diving into the latest developments, let’s briefly review the background of this event:

Aave Labs is the developer of the Aave protocol and the core builder of its main products, responsible for frontend interfaces, new feature development, and technical upgrades. The Aave DAO is a decentralized governance organization that can vote on major matters such as protocol parameters, interest rates, fund allocation, and development directions.

On December 4, Aave Labs partnered with CoW Swap, which will replace Paraswap as the default exchange integration tool on the aave.com platform. This move triggered a series of subsequent disputes.

On December 11, EzR3 aL, representing the Orbit protocol, posted on the governance forum questioning whether Aave Labs is “privatizing” the protocol’s value. He pointed out that replacing CoW Swap would cause Aave DAO to lose at least $10 million annually. Additionally, Marc Zeller, a former core member of AAVE and founder of ACI, stated that CoWSwap’s solver relies on external free flash loans, bypassing Aave’s facilities and further reducing DAO income.

Aave Labs responded by stating that the Aave interface is operated by Aave Labs and is completely independent of the DAO-managed protocol. They clarified that they never promised to share adapter surplus fees with the DAO; previous revenue contributions were merely generous donations 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 the brand. The brand and interface belong to Labs.

On December 16, the situation intensified. Ernesto Boado, former CTO of Aave and co-founder of BGD Labs, officially published an ARFC proposal titled “Transfer of Brand Asset Control to Token Holders” in the Aave community. The proposal includes clear regulations on ownership rights and usage terms of Aave’s brand assets and intellectual property (covering domain names, social accounts, naming rights, etc.), and grants the DAO control over these assets. On the same day, “tulipking,” a participant in the Aave DAO, proposed an Aave Improvement Proposal (AIP): the “Poison Pill Plan,” which suggests that the DAO adopt this plan to acquire Aave Labs’ full control over its intellectual property (including published code and trademarks) and company equity, and to recover all income previously earned from using the Aave brand.

From these key events, we can see the process of escalating conflict that has led to the formation of the current Aave governance storm. (For detailed information, see: “US SEC ends four-year investigation, Aave DAO and Labs fight for sovereignty, what has Aave experienced recently?”)

Subsequently, the dispute parties fell into a deadlock. On December 23, Marc Zeller again expressed his views. He pointed out that the true driving force behind the protocol is the Aave DAO, not Avara (the parent company of the Aave protocol, which has already transitioned into an independent enterprise). Over the past three years, core operations such as risk management, technical upgrades, and ecosystem expansion have been executed by service providers under the DAO, generating continuous substantial income for the protocol. Many individuals and teams contributing to Aave’s successful operation now work within the DAO, not inside Avara. Zeller emphasized that if strategic brand assets like domain names and trademarks are still controlled unilaterally by private companies, it would weaken the DAO’s governance power and potentially harm ecosystem fairness and talent retention, ultimately threatening the development foundation of the entire protocol.

Zeller believes both Avara and the DAO can operate normally and proposed a solution: ownership of strategic brand assets should belong to an entity controlled by the DAO. Under clear and enforceable authorization, management rights could be delegated back to Avara. Regarding monetization, the DAO should define and negotiate from the ownership perspective, providing fair terms for all parties involved.

Internal Conflict Escalation

During this period, Aave founder and CEO Stani Kulechov did not engage in much debate but directly initiated the “Transfer of Brand Asset Control to Token Holders” ARFC proposal via Snapshot voting, scheduled from December 23, 10:40 to December 26, 10:40. He tweeted that the ARFC proposal vote is fully legal, and over the past five days, all parties have discussed and set a timetable for the proposal, with the Snapshot meeting complying with governance framework requirements. He emphasized, “People are tired of endless discussions; voting is the best way to resolve conflicts and reach final governance.”

From supporters’ perspective, Kulechov’s move aims to quickly end the dispute, prevent deadlock, and avoid negative impacts on the protocol’s stability and development. After all, due to crypto market volatility and this dispute, the AAVE price has fallen to $150, a decline of over 27% since December 11.

However, opponents see Kulechov’s actions as a power grab disguised as respecting the proposal and voting process. Hyperliquid trader “Borg” harshly condemned his tweet, stating that his behavior severely damages healthy governance—after days of silence, he suddenly attempted to rush a vote during Christmas to forcibly seize control. Others argued that the legitimacy of the vote depends on the entire process, not just the result. The three-day voting window is absurd and runs counter to the interests of token holders.

It is worth noting that Kulechov recently spent $10 million to buy AAVE tokens, which was also criticized as “capital manipulation of governance.” Many in the crypto community believe that large token purchases could materially influence votes on high-risk proposals.

In response, Ernesto Boado, the initiator of the ARFC proposal, stated that this is not his proposal. Aave Labs, for unknown reasons, hastily submitted the proposal for voting unilaterally. Although his name appears on the proposal, he was not notified beforehand. If asked, he would never have approved it.

He emphasized, “My intention was not to submit a vote while the community is still actively discussing and generating valuable opinions. This is a blatant breach of trust principles between the community and Labs. Public governance is about open discussion, even when difficult. Labs rushing to vote is shameful.” He advised the community to abstain or not participate. Subsequently, Marc Zeller responded, “We have decided to abstain and hope the community will do the same.”

Currently, Snapshot data shows that 53.12% of voters (about 801,800 AAVE) explicitly oppose the proposal; 42.73% (about 644,800) abstain; and only 4.15% (about 62,600 AAVE) support it.

Meanwhile, this vote once again exposes the high concentration of voting power in Aave: a small number of large holders control over half of the total voting power. The top five addresses collectively hold over 62% of votes. Based on the results, it seems the proposal will be rejected, which may align with Aave Labs’ expectations.

However, does the rejection of this proposal mean that the governance dispute surrounding Aave will come to an end?

The reality is quite the opposite. After Aave Labs’ actions, the controversy has not subsided but has intensified. Ernesto Boado has already explicitly rejected the proposal and stated that the final proposal will only be submitted after full community discussion. This indicates that the conflict will continue to escalate, even trending toward a “revolution.”

To date, the impact of this governance dispute has gone beyond a single protocol, serving as a mirror for the industry to examine the feasibility of decentralized governance. It reminds us that even in the “code is law” DeFi space, clear, reasonable, and efficient governance processes are indispensable. Regardless of the outcome of the Aave incident, this storm will leave a legacy and become a landmark case in the decentralization of crypto projects.