Core "key contributors" leaving one after another, has Aave's DAO dream been shattered?

Author: Bootly, BitpushNews

On March 3rd, the core governance team of the Aave protocol, Aave Chan Initiative (ACI), announced it would cease operations and exit AAVE.

This is the second major contributor to leave within two weeks—earlier, on February 20th, the development team behind Aave V3, BGD Labs, announced their departure.

Following the announcement, the AAVE token price dropped over 11%.

As one of the most successful DAOs in DeFi history, managing nearly $270 billion in assets, this leading DeFi project is experiencing a profound internal upheaval.

From revenue disputes to bundled voting

The warning signs of this crisis had been brewing since December last year.

At that time, Aave Labs replaced the front-end transaction aggregator from ParaSwap to CoW Swap without community governance discussion. The fees that previously went into the DAO treasury were redirected into Aave Labs’ account.

In response to criticism, Aave founder Stani Kulechov explained: “The front end was built by Labs, so the revenue naturally belongs to Labs; the smart contracts and liquidity pools are the property of the DAO.” While this explanation makes legal sense, it sparked dissatisfaction within the community.

To quell the controversy, in February this year, Aave Labs proposed a plan called “Aave Will Win.” The proposal mainly included: requesting the DAO to approve approximately $51 million for V4 development, in exchange for future income from all Aave branded products being allocated to the DAO, and establishing Aave V4 as the sole technical foundation, gradually phasing out V3.

The problem was that these three issues were bundled together. Support for revenue belonging to the DAO but concern over the large fund size? No choice. Belief that V3 still has value and shouldn’t be neglected? Also no choice. Accept everything or reject everything.

ACI’s dissatisfaction: opaque voting

In ACI’s exit statement, the core accusation was: a significant portion of votes supporting the proposal came from addresses associated with Aave Labs. A quick check showed that the proposal was narrowly approved with only 52.58% support, and ACI believed that without these “self-votes,” the outcome might have been different.

Founder Marc Zeller wrote: “If the largest budget recipient can leverage undisclosed voting power to push through their own proposal, then independent service providers lose their purpose within the DAO.”

ACI did try to address the issue. Before voting, they proposed four conditions, including stricter on-chain milestone tracking and restrictions on self-voting by budget recipients, but these were not adopted.

This conflict reflects structural issues within DAO governance.

Aave Labs controls the codebase, brand domains, social media, and development discourse. BGD Labs maintains the main V3 version—they contribute over 75% of the protocol’s revenue and 97% of total deposits. ACI is responsible for governance coordination and business development, claiming to have driven 61% of governance actions over the past three years, helping increase Aave’s DeFi market share from under 50% to over 65%.

These three teams were supposed to serve as checks and balances. But with BGD and ACI leaving one after another, the remaining power center’s statements are difficult to fully trust.

Stani Kulechov responded after ACI announced their departure: “Thanks to Marc for his contributions over the years. The protocol will continue to operate normally.”

However, this response did not address the core issue: when the most qualified person to assess V3’s technical risks has left, how can the DAO confidently commit to an untested V4?

Another noteworthy detail is that institutional investor Blockchain Capital later stated that, because the custody platform did not support snapshot voting, they were unable to participate with their held AAVE tokens. This reveals another reality of DAO governance: in theory, token holders collectively decide, but in practice, voting power is often concentrated in a few hands.

The governance dilemma of DAOs

ACI stated that during the four-month transition period, they will transfer or open-source tools and responsibilities such as governance dashboards, incentive frameworks, and committee roles. But some things are hard to transfer: three years of accumulated governance experience, familiarity with protocol details, and the interpersonal networks that coordinate different stakeholders.

Data shows that ACI spent a total of $4.6 million over three years, helping GHO stablecoin grow from $35 million to $527 million. Who will take over this work in the future remains unknown.

This turmoil at Aave is essentially a microcosm of the governance challenges faced by DAOs.

Theoretically, a DAO is a community of token holders. But in reality, governance is often dominated by the founding team, early investors, and core developers. These roles are both rule-makers and rule-enforcers, and sometimes also recipients of the budget. When conflicts of interest arise, whether “procedural justice” is enough becomes a key debate.

A DeFi industry insider commented: “It’s not about who is right or wrong, but about how the existing governance mechanisms fail to effectively resolve conflicts when interests and positions diverge.”

What’s next?

The upcoming revisions to the ARFC proposal on “Aave Will Win” will be the first window into the evolution of this situation. If Kulechov’s promised “structural improvements” can be implemented—such as splitting bundled proposals and clarifying voting boundaries—this could bring an end to this turmoil.

If consensus cannot be reached, the most extreme possibility is that BGD and ACI will fork and create a new protocol. Although liquidity barriers are high, it’s not impossible—core developers and governance teams leaving simultaneously could provide the technical and community foundation for a fork.

For Aave, the immediate challenge is how to fill the void left by the departure of these two core teams. Longer-term, the question is how to find a more sustainable balance between the founder’s vision, the interests of core developers, and community will. If the “centralization of power” cannot be addressed, even the strongest protocols risk losing their competitive edge amid endless internal conflicts.