Aave Labs Concedes! Promises to share revenue tokens with holders, calming DeFi governance disputes

Aave Labs founder Stani Kulechov issues an important governance statement, promising to distribute non-protocol revenue to token holders and seeking solutions regarding brand assets. This concession stems from intense community questioning over the transfer of frontend fees, with disagreements between the DAO and the development team on profit sharing and intellectual property rights escalating into the governance crisis of DeFi’s largest lending protocol.

Frontend Fee Transfer Sparks DAO and Lab Confrontation

The governance conflict between Aave Labs and Aave DAO is not an overnight event but a long-standing structural contradiction. Aave Labs developed the first version of the Aave protocol, but as the protocol matured, Aave DAO gradually became the main maintainer. This “developer-community” power shift is common in DeFi, but Aave’s situation is more complex because Aave Labs continues developing new products and profiting from them.

The trigger was Aave Labs’ decision to transfer frontend fees out of Aave DAO. Token holders questioned whether Aave Labs was developing new frontend products using the protocol’s brand and traffic but reaping all the benefits instead of sharing with the DAO. This “using protocol resources for private profit” model sparked strong dissatisfaction. Critics argue that Aave Labs is essentially “parasitic” on the protocol, enjoying the trust premium brought by the protocol’s brand without bearing corresponding responsibilities.

A deeper contradiction lies in role ambiguity. Is Aave Labs a service provider for the protocol or an independent commercial entity? If the former, its profits should belong to the DAO; if the latter, why can it use the Aave brand and traffic? This ambiguity isn’t an issue when the protocol is small, but when Aave becomes a DeFi giant with over $20 billion in total value locked, every cent of profit distribution becomes sensitive.

Token holders’ anger is driven not only by economic interests but also by the weakening of governance rights. The DAO theoretically holds the highest decision-making power over the protocol, but in practice, Aave Labs maintains substantial control through technical advantages and information asymmetry. This frontend fee transfer event exposes the gap between “nominal DAO governance” and “actual team control.”

Kulechov’s Reconciliation Plan and Profit Alignment Commitment

Facing community pressure, Kulechov posted a lengthy response on the governance forum. He wrote: “In light of recent community discussions, Aave Labs is committed to sharing the protocol’s outside-generated revenue with token holders. For us and AAVE holders, alignment of interests is crucial, and we will soon release a formal proposal that includes specific operational mechanisms.”

This statement contains three key commitments. First, it explicitly acknowledges the existence of “non-protocol revenue,” a significant concession since Aave Labs had previously avoided publicly discussing the scale of this income. Second, it promises to share rather than merely “consider sharing,” with language that affirms the sincerity of the concession. Third, it emphasizes “alignment of interests,” attempting to shift the conflict framing from “distribution dispute” to “common benefit.”

However, this commitment still leaves some ambiguity. What exactly constitutes “non-protocol revenue”? Does frontend fee count? If Aave Labs develops new products using the Aave brand, how will income be divided? What share will be allocated? These details will be revealed in the upcoming formal proposal, but currently, the statement reads more as a “principled declaration” than an “operational plan.”

Three Key Signals from Aave Labs’ Concession

Commitment to Share Non-Protocol Revenue: Clearly states that revenues generated outside the protocol will be shared with token holders, but specific mechanisms and ratios are yet to be announced, with a formal proposal “coming soon.”

Brand Asset Negotiation Stance: Responds to DAO’s request to transfer Aave intellectual property rights, indicating that solutions will be sought “in terms of branding,” implying a possible transfer of some brand control.

Permissionless Ecosystem Vision: Proposes that “visionary teams can independently build products on the permissionless Aave protocol,” attempting to shift the conflict from a “zero-sum game” to “ecosystem prosperity.”

These signals show that Aave Labs is not surrendering entirely but making strategic concessions. Revenue sharing is an economic concession, brand negotiations are a power concession, and the ecosystem vision is a discourse power move, positioning itself as an “ecosystem builder” rather than a “protocol parasite.”

Intellectual Property Rights as the Next Battleground

Kulechov’s statement mentions seeking solutions “in terms of branding,” which is a direct response to DAO’s demand for Aave Labs to transfer Aave’s intellectual property rights. This demand is more aggressive than revenue sharing because it involves control over the protocol’s core assets.

Intellectual property includes trademarks, domain names, code copyrights, and more. If Aave Labs transfers these to the DAO, anyone could develop products using the Aave brand, and Aave Labs would lose its brand monopoly advantage. This would be a fatal blow to Aave Labs’ business model, as one of its core competitive advantages is the trust backing of the “official Aave team.”

Supporters of the DAO argue that since the protocol is governed by the community, the brand should also belong to the community. The value of the Aave brand is built collectively by users and developers and should not be monopolized by a single entity. More radical voices even call for Aave Labs to rename itself to demonstrate independence from the protocol.

Aave Labs faces a dilemma: refusing to transfer the brand rights entirely risks ongoing community resistance; transferring them completely would eliminate its business moat. Kulechov’s “seeking solutions in terms of branding” hints at a possible compromise—such as establishing a licensing framework that allows the DAO to authorize third parties to use the Aave brand while Aave Labs retains priority rights.

Permissionless Ecosystem Vision and Reality

Kulechov attempts to reframe the dispute as a “long-term vision” issue. He believes that both sides must reach consensus on the “long-term vision” to enable Aave’s development to transcend “its current crypto-native use cases” and “support new asset classes and lending models, such as real-world assets, consumer, and institutional lending.”

The core of this vision is: “Allow visionary teams to independently build products on the permissionless Aave protocol, while the protocol itself gains revenue through increased usage and income.” This model is similar to Ethereum’s ecosystem, where anyone can develop applications on Ethereum, and the protocol benefits from transaction fees.

However, this vision faces practical challenges. Ethereum’s “permissionless” capability is because it is positioned as a base layer blockchain rather than a specific application. As a lending protocol, Aave is an application layer, with its brand and specific products deeply intertwined. Allowing brand usage could lead to inconsistent “Aave products,” damaging overall brand value.

More critically, the profit-sharing mechanism is complex. If multiple teams develop products based on Aave, how are revenues distributed among the protocol, the development teams, and token holders? This requires sophisticated smart contracts and governance rules, and whether the current Aave DAO governance can support such complexity remains uncertain.