Aave Core Contributors Exit, Raising Concerns Over DAO Governance

Original author: Bootly, BitpushNews

On March 3, the Aave Protocol's core governance team, the Aave Chan Initiative (ACI), announced it would shut down operations and exit AAVE.

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

After the announcement, the AAVE token price dropped more than 11%.

As the most successful DAO in DeFi history and the leading DeFi protocol with nearly $27 billion in total value locked, it is currently experiencing profound internal turmoil.

The seeds of this crisis were sown as early as last December.

At the time, Aave Labs replaced the frontend aggregator from ParaSwap to CoW Swap without undergoing any governance discussion, diverting transaction fees that originally flowed to the DAO treasury into Aave Labs’ account.

In response to criticism, Aave founder Stani Kulechov stated that the frontend interface was built by Labs, so its revenues naturally belong to Labs; only the smart contracts and liquidity pools belong to the DAO. While this explanation is legally sound, it has sparked dissatisfaction within the community.

To resolve the controversy, Aave Labs proposed a proposal titled "Aave Will Win" in February this year. The proposal primarily includes: requesting the DAO to approve approximately $51 million in funding for V4 development, in exchange for assigning all future revenues from Aave-branded products to the DAO, and establishing Aave V4 as the sole technological foundation while phasing out V3.

The problem is that these three things are bundled together. Support revenue going to the DAO but think the fund size is too large? No option. Believe V3 still has value and shouldn’t be ignored? Again, no option. It’s all or nothing.

In ACI's exit statement, the core allegation is that a significant portion of the votes supporting the proposal came from addresses associated with Aave Labs. The interim vote passed by a narrow margin of just 52.58%, and ACI believes the outcome might have been different without these "self-votes."

ACI founder Marc Zeller wrote: "If the largest budget recipient can use their undisclosed voting power to force through their own proposal, then independent service providers lose their purpose within the DAO."

ACI did not fail to attempt to address the issues. Before the vote, it proposed four conditions, including stricter on-chain milestone tracking and limiting budget recipients from self-voting, but none were adopted.

This conflict highlights structural issues within DAO governance.

Aave Labs controls the codebase, brand domains, social media, and development direction. BGD Labs maintains the primary version, V3, which generates over 75% of the protocol’s revenue and 97% of its total deposits. ACI is responsible for governance coordination and business development, claiming to have driven 61% of governance initiatives over the past three years, helping Aave’s DeFi market share rise from under 50% to over 65%.

These three teams were meant to check and balance each other. But when BGD and ACI successively stepped away, the remaining power center, no matter how it declares its stance, is difficult to fully trust.

Stani Kulechov responded after Marc's departure from ACI: "Thank you, Marc, for your years of contribution—the protocol will continue to operate normally."

But this response fails to address the core issue: how can the DAO confidently bet its future on V4, which has yet to be tested in practice, when those best equipped to assess the risks of V3 have already left?

Another notable detail is that institutional investor Blockchain Capital later stated that their held AAVE could not participate due to the custodial platform not supporting snapshot voting. This reveals another reality of DAO governance: while decisions are nominally made collectively by token holders, voting power often remains concentrated in the hands of a few.

ACI stated that during the four-month transition period, it will transfer or open-source tools and responsibilities such as the governance dashboard, incentive framework, and committee roles. However, some elements are difficult to transfer: three years of accumulated governance experience, familiarity with protocol details, and the interpersonal network for coordinating diverse stakeholders.

Data shows that ACI spent $4.6 million from the DAO over the past three years to help grow the GHO stablecoin from $35 million to $527 million. It remains unknown who will take over this work in the future.

This Aave controversy is essentially a microcosm of the DAO governance dilemma.

Theoretically, a DAO is a community of token holders. In practice, governance is often dominated by founding teams, early investors, and core developers. These roles are frequently the creators, enforcers, and sometimes even the recipients of budgets. When conflicts of interest arise, whether "procedural justice" is sufficient becomes a point of contention.

A DeFi practitioner commented: “This isn’t about who’s right or wrong—it’s that when interests and positions diverge, the existing governance mechanisms don’t provide effective ways to resolve the conflict.”

The ARFC phase’s revision of the "Aave Will Win" proposal will be the first window into how events unfold. If Kulechov’s promised "structural improvements"—such as separating bundled proposals and clarifying the boundaries of voting behavior—are implemented, they may bring closure to this controversy.

If consensus cannot be reached, the most extreme possibility is that BGD and ACI could fork off and create a new protocol. Although the liquidity barriers are high, it is not impossible—simultaneous departure of core developers and the governance team would provide both the technical and community foundation for a fork.

For Aave, the immediate challenge is filling the void left by the departure of two core teams. The longer-term issue is finding a more sustainable balance between the founder’s vision, the interests of core developers, and the will of the community—if the paradox of centralized power remains unresolved, even the strongest protocol may lose its first-mover advantage through endless internal friction.