Aave's internal strife is far more thrilling than what you see.


On the surface, this was just Aave Labs changing the front-end trading routing from ParaSwap to CoWSwap, but in reality, this is a constitutional war about 'who owns the traffic entrance tax' that has erupted after DeFi has matured.


When decentralized protocols (DAOs) bear all the risks of hacking, bad debts, and regulation, do the companies (Labs) building the front-end interfaces have the right to cut off cash flow in a zero-risk situation?


1. The 'dual paradox' of products and protocols


The fuse of the dispute is specific 'money'.


In the past, Aave's front-end exchange function was primarily to retain users, and the fees generated flowed back into the DAO vault. With the integration of CoWSwap, this fee of about 15-25 basis points was quietly rerouted into an entity controlled by Aave Labs.


In the face of the DAO community's doubts, Aave Labs presented a carefully designed conceptual weapon—'Product-Protocol Dualism':



  • Protocol: a public infrastructure owned by the DAO, responsible for the underlying lending logic.


  • Product: the front-end interface (aave.com), independently operated and funded by Labs.


Labs' logic is impeccable: 'The front end is a private product we pay to operate, just like ByBit or DeFi Saver integrating Aave, it is only natural for us to charge.'


But this precisely exposes the biggest gray area in DeFi governance: If the 'gate' is private, then is the 'bank' still for the users?


II. Asymmetry of Risk: Who is bearing the burden?


Community representatives EzR3aL and Marc Zeller pointed out the fatal flaw in this logic: Asymmetric Risk.


Imagine you invested in a bank (Aave DAO), with the money and bad debt risks in the vault borne by you. Suddenly, the bank's lobby manager (Aave Labs) announces: 'To enter the vault, customers must go through this door. I built the door, so the toll belongs to me personally.'


This is the current situation:



  • DAO (token holders): have built Aave's brand trust with real money, provided billions in liquidity, and are always ready to pay for hacker attacks or liquidation failures.


  • Labs (equity holders): leverage the brand moat established by the DAO, attempting to strip away upside profits by controlling the front end without bearing any downside risks.


This 'parasitic' value capture is breaking the long-standing tacit agreement of 'shared interests' in the community.


III. Financial Truth: The no longer sacred 'Labs product'


If Labs' actions are for ecological prosperity, the community might still tolerate it. But the financial data ruthlessly pierces through this filter.


Take the Horizon project as an example; this is an RWA instance strongly promoted by Labs.



  • DAO Investment: $500,000 incentive fund.


  • Actual Output: Only about $100,000 in revenue.


  • Result: DAO has a net loss of $400,000 on the books.


Not to mention in the MegaETH incident, Labs bypassed the DAO, their long-term partner, and directly negotiated point redemption as a private entity.


This data reveals a harsh fact: Aave Labs' company KPIs have begun to diverge from Aave DAO's balance sheet. They are willing to let the DAO bear losses to promote their new products (whether Horizon or the future V4 vault).


IV. The Trap of Abstraction Layer: The hidden concerns of the V4 era


The urgency of this debate is due to the imminent arrival of Aave V4.


The core vision of V4 is 'abstraction'—introducing more automated vaults and smarter routing. This means that value capture points are shifting from the underlying 'smart contracts' to the 'routing layer' of user interactions.


If the community recognizes Labs' exclusive rights to CoWSwap fees today, then in the future, Labs will naturally control the fee rights of all automated vaults in V4. At that time, the Aave DAO will completely become a silent partner of the underlying funds, while the richest profits will be siphoned off by the thin layer of 'middleware' at the front end.


V. Endgame Simulation: The growing pains that must be endured


This is not only a crisis for Aave but also a necessary path for all DeFi protocols.


The interest gap between equity and tokens must be bridged. Just like what Uniswap experienced back in the day, this division can ultimately only be resolved through a redistribution of rights—either Labs will repurchase tokens with part of the front-end revenue, or token holders will regain control over the front end through governance (or fund the community to build an alternative front end).


For $AAVE investors, this is a crucial stress test. The outcome of this game will determine whether $AAVE will be merely a 'piece of paper' with voting rights or a 'golden shovel' that can truly capture ecological cash flows.


Aave is at a crossroads: on the left is becoming a back-end component of a Web2 company, and on the right is evolving into a truly sovereign decentralized finance giant.