The governance conflict of Aave is compounded by a $10 million income dispute
A dispute has erupted over the income distribution among the community governing the DeFi lender Aave and its main development company, Aave Labs.
The conflict centers on the recent decision by Aave Labs to integrate CoW Swap as the underlying infrastructure for trading on the main website of the protocol. The change replaced ParaSwap, a previous integration that generated referral fees for the Aave DAO treasury.
DAO members question the economic repercussions of the interface update.
Governance delegates say the change has cut a source of revenue of approximately $200,000 per week. Annually, they estimate the impact at around $10 million, diverting value from token holders.
Marc Zeller, founder of the Aave Chan Initiative, criticized the move, calling it a “covert privatization” of brand assets.
Zeller argued that Aave Labs unilaterally altered the economic agreement without seeking the DAO's approval, which governs the underlying smart contracts.
“Aave Labs, in its pursuit of its own monetization, redirected Aave user volume to competitors. This is unacceptable. By making this integration, the Aave protocol lost two streams of revenue that cannot be easily replaced,” he wrote.
Zeller warned that the lack of communication raises concerns about how future updates will be handled.
He specifically pointed to the upcoming V4 update and questioned whether other “ancillary features” could also be protected from the DAO.
“It is important to consider the overall picture to determine whether Aave Labs breached its expected fiduciary duty towards the Aave DAO and AAVE token holders, and what we should expect from V4 in general,” Zeller concluded.
Aave Labs Defense Movements
In a detailed response, Stani Kulechov, founder and CEO of Aave Labs, defended the integration, rejecting the characterization of lost funds as stolen revenue.
Kulechov argued that the previous fees from ParaSwap were a “discretionary surplus” rather than a mandated protocol fee.
“It was never a fee change; it has been a surplus that we donated to the DAO,” he stated.
He also drew a clear line between the Aave protocol, the decentralized smart contracts governed by the DAO, and the front-end interface. He described the interface as a privately funded and maintained product by Aave Labs.
Kulechov stated that Aave Labs bears the engineering and security costs for the website. He added that the DAO does not subsidize ongoing product development expenses.
Consequently, the firm asserts the right to monetize the interface to ensure its sustainability.
“It is also perfectly fine for Aave Labs to monetize its products, especially since they do not touch the protocol itself,” he said.
The development firm also reiterated Kulechov's position, acknowledging a failure to communicate the change effectively.
The firm said it switched to CoW Swap to offer better execution prices and greater protection against MEV (maximum extractable value), rather than generating additional revenue.#AAVE $AAVE
