The Aave lending protocol has fallen into a public relations crisis due to disputes between the team and the community over the direction of fees and brand control, leading the second-largest whale to liquidate its holdings and triggering a drop in token prices. The community demands the transfer of brand asset control to token holders, while the founder's opposition to the proposal exacerbates the divide. The incident exposes structural contradictions between DeFi protocols and their teams.
Author: Azuma (@azuma_eth)
Source: Mars Finance
The leading lending protocol Aave is mired in a public opinion whirlpool, with escalating tensions between the team and the community objectively affecting the confidence of token holders in the AAVE token itself.
In the early hours of today, aside from the project party, protocol contracts, and CEX, the second largest AAVE whale sold off 230,000 AAVE (worth about $38 million), causing AAVE to drop 12% in the short term. It is reported that this 'second-largest brother' bought the AAVE at an average price of $223.4 from the end of last year to the beginning of this year, and sold it off today at an average price of about $165, resulting in a final loss of $13.45 million.
Odaily Note: The whale address is https://debank.com/profile/0xa923b13270f8622b5d5960634200dc4302b7611e.
Event origin: Dispute over fee flow
To clarify Aave's community crisis this time, we need to start from a recent change in Aave's frontend.
On December 4, Aave announced a partnership with Cow Swap, adopting the latter as the default trading path for Aave's frontend exchange function (Odaily Note: previously ParaSwap), achieving better pricing through the latter's anti-MEV function.
This seemed like a normal functional upgrade, but the community quickly discovered that the additional fees generated by this function (including referral fees or positive slippage surplus fees) would have flowed to the Aave DAO treasury address when using ParaSwap, but switched to the Aave Labs address after changing to Cow Swap.
Community representative EzR3aL was the first to discover this change that Aave did not actively mention. He questioned the Aave team in the governance forum and calculated that just tracking Aave's income flow on Ethereum and Arbitrum, this fee is expected to bring in about $200,000 per week, corresponding to an annual income of over $10 million — which means that Aave transferred at least tens of millions of dollars in income from the community address to the team address without anyone knowing.
Core controversy: Whose brand is Aave?
With the fermentation of EzR3aL's post, many AAVE holders felt backstabbed, especially considering that Aave did not communicate with the community or disclose any information during this change, which somewhat suggests an intention to conceal this change.
In response to community doubts, Aave Labs responded directly under EzR3aL's post, stating that there should be a clear distinction between the protocol layer and the product layer. The exchange function interface of Aave's frontend is entirely operated by Aave Labs, which is responsible for funding, building, and maintaining it. This function is completely independent of the DAO-managed protocol, so Aave Labs has the right to decide how to operate and profit autonomously... The income that previously flowed to the Aave DAO address was a donation from Aave Labs, not an obligation.
In short, Aave Labs' attitude is that Aave's frontend interface and associated functions essentially belong to the team's product, and the income generated from it should also be regarded as company property and should not be mixed with the protocol and related income controlled by the DAO.
Once this statement was made, a heated discussion quickly arose in the community regarding the ownership of the Aave protocol and product. A well-known DeFi analyst wrote an article (Who Really Owns Aave?) about this, and Odaily Planet Daily also reprinted a Chinese translation, which interested parties can refer to as supplementary reading.
On December 16, the conflict was further intensified. Aave's former CTO Ernesto Boado initiated a proposal on the governance forum, requesting the transfer of control over Aave brand assets (including domain names, social accounts, naming rights, etc.) to AAVE token holders. The relevant assets will be managed by an entity controlled by the DAO (specific form to be determined later) and will have strict anti-encroachment protection mechanisms set in place.
The relevant proposal received nearly ten thousand views and hundreds of high-quality replies on the Aave governance forum, with participants from various parties in the Aave ecosystem expressing their positions under this proposal. Although some voices believe that the execution plan of this proposal is not perfect and has the suspicion of exacerbating opposition, most replies expressed a supportive attitude.
The founder expressed his position, but the community does not buy it.
As community sentiment continued to heat up, Aave founder Stani appeared on the forum to respond, stating: '...This proposal is leading us in a direction that is detrimental to the Aave ecosystem. It attempts to simplify a complex legal and operational issue into a simple 'yes/no' vote without providing a clear execution path. Handling such a complex issue should adopt a specially designed structured process, achieving consensus through multiple interim checks and specific solutions. For these reasons, I will vote against this proposal...'
From a business operation perspective, perhaps Stani's claim that the proposal is too hasty is not wrong, but in the current discussion atmosphere, this statement is easily interpreted as 'the Aave founder does not agree to transfer brand assets to token holders', which clearly further exacerbates the opposition sentiment between the community and the team.
After Stani's statement, some aggressive comments targeting Stani even appeared under the original post, while more users expressed dissatisfaction through the forum or social media. Some OG users mentioned that for the first time they considered selling off AAVE, while loyal believers of AAVE stated: 'AAVE holders should realize that this is just another DeFi junk coin. It is neither better nor worse than other coins.'
And the latest community dynamic is the aforementioned, with the second-largest brother liquidating over ten million dollars in losses.
Can AAVE still be bought?
Just two weeks ago, Odaily Planet Daily wrote an article (What did the smart money see in AAVE at low positions?). At that time, AAVE was still a favorite of top institutions like Multicoin Capital, and its premium brand reputation, strong capital reserves, clear expansion path, and robust revenue and buyback flow proved that AAVE is a 'true value coin' different from other altcoins.
But in just two weeks, a public opinion crisis from fee attribution to brand control and team-community relations quickly brought AAVE from 'value coin representative' to the center of controversy, even landing on the short-term decline list under emotional impact.
As of the publication of this article, Aave Labs has indicated under Ernesto's proposal that it has initiated an ARFC snapshot vote regarding this proposal, allowing AAVE holders to formally express their positions to clarify future development directions. The result of this vote and Aave Labs team's subsequent handling attitude will significantly influence Aave's community belief and AAVE's short-term price performance.
It is important to emphasize that this incident is not simply a 'bad news' or 'performance change', but a concentrated inquiry into Aave's existing governance structure and rights boundaries.
If you believe that Aave Labs will maintain a high degree of alignment with Aave DAO in long-term interests, and that the current friction is more of a communication and process error, then the price retracement driven by emotions may be a good entry window; but if you think that the controversy reveals not an isolated issue, but rather a structural contradiction between the team and the protocol, with long-term unclear rights and lack of institutional constraints, then this storm may just be the beginning.
From a broader perspective, the controversy surrounding Aave is not an isolated case. As DeFi matures, with real and considerable protocol income, and as brands and frontends begin to have commercial value, some structural contradictions between protocols and products, teams and communities will emerge. Aave being pushed into the spotlight this time is not because it made more mistakes, but because it has gone further.
The debate over fees, brand, and control is not just a question for AAVE, but a necessary question that the entire DeFi industry will inevitably face sooner or later.
