An internal war sweeping through the Aave community ultimately exposed the sharpest contradictions in the DeFi space at the cost of a whale losing over 13 million dollars and a token price plummeting 12% in a single day.
In the early morning of December 22, 2025, a whale known as 'Brother Two on the List' executed a brutal sell-off worth 38 million dollars, breaking through the psychological defenses of countless holders. Within just one and a half hours, 230,000 AAVE were dumped onto the market, causing the price to plummet from 176 dollars to 156 dollars, with a drop of 12%.
This massive loss of over 13.4 million dollars in liquidation is not a simple market action. Behind it lies a comprehensive confrontation between Aave Labs, the founding team of the leading DeFi protocol Aave, and its governance community Aave DAO, regarding the attribution of tens of millions of dollars in annual income and core brand control. This 'infighting' not only shook the trust foundation of the community but also made onlookers begin to reassess: In the ideal world of 'decentralization', who truly holds the power, the code or the people who write the code?
01 Eye of the Storm: A Multi-Million Dollar Battle of Interests
The storm began with a seemingly minor front-end technical change. In early December, Aave switched its default exchange aggregator from ParaSwap to Cow Swap.
Technical upgrades are not inherently problematic, but the community soon discovered an anomaly: previously generated fees through this function flowed into the Aave DAO treasury, whereas after the switch, this anticipated annual income exceeding $10 million quietly shifted to the team address of Aave Labs.
Community representative EzR3aL took the lead in questioning the team on the governance forum, asking why wealth belonging to the collective was transferred without communication with the community. Aave Labs responded firmly by distinguishing 'protocol' from 'product,' stating that the front-end product was independently invested in and maintained, so the income generated should be at their discretion, and the income that previously flowed to the DAO was merely a 'donation.'
02 Trust Collapse: From Financial Disputes to Ownership Wars
Aave Labs' stance on the 'donation theory' ignited the pent-up anger within the community. The debate quickly escalated from 'who gets the money' to the core ownership question of 'who truly owns the Aave brand.'
On December 16, Aave's former CTO Ernesto Boado initiated a proposal of great symbolic significance, requesting the transfer of control over Aave's brand assets (including domain names, social media accounts, naming rights, etc.) to AAVE token holders. This move received nearly ten thousand views and substantial support from the community and was seen as a 'counterattack' against the team's unilateral actions.
Founder Stani Kulechov subsequently voiced opposition to the proposal, deeming it too hasty. However, in the tense atmosphere of confrontation, this statement was widely interpreted as 'the founder's refusal to return the brand to the community,' further exacerbating the division.
03 The Market's Judgment: Whales' 'Voting with Their Feet' and Bottom Fishers' Courage
The cracks of trust are ultimately reflected most directly in the price.
On December 22, the second-largest whale by holdings chose to 'cut losses' and exited the market, clearing 230,000 AAVE at an average price of about $165, incurring a loss of over $13.4 million. This sale became the direct catalyst for the price crash.
Market sentiment once dropped to freezing point, and even some long-term holders expressed that they had 'for the first time thought about liquidating their positions.'
However, when the price of AAVE broke below $160 and dropped to the $150 range, distinctly different voices emerged in the market. Some believe that a price pullback driven by sentiment may be a window for long-term value investors. Amidst the community's pessimism, some investors chose to buy 500 AAVE near $150, betting $75,000 in real money that this crisis could eventually be resolved.
04 Mirror and Future: Governance Insights from Stablecoins
The governance crisis of Aave is not an isolated case; it exposes the 'growing pains' that all emerging DeFi protocols may face: how should the responsibilities and benefits between the team and the community be defined when the protocol transitions from concept to profitability, and massive commercial interests begin to emerge?
On this issue, fully decentralized stablecoins may offer a different perspective. Taking USDD (Decentralized USD) as an example, it has aimed to build a trustless stable system since its inception. Its 2.0 version maintains stability through an over-collateralization mechanism and transparent on-chain reserve proofs, with all rules predefined and publicly executed by smart contracts. More importantly, its key price stability module (PSM) decision-making and profit distribution mechanism aims to achieve this through completely transparent on-chain governance, avoiding the gray areas of interest between centralized teams and holders.
This provides a reflective mirror for Aave and the entire DeFi industry: true decentralization may not only lie in the distributed nature of technology but also in the transparency, regulation, and preemption of power and interest distribution.
05 Aave at a Crossroads: Solid Fundamentals, but Faith Needs Rebuilding
Setting aside governance disputes, the fundamentals of the Aave protocol still demonstrate a king-like dominance. As of December 2025, its total locked value exceeds $50 billion, solidly ranking first in the lending space. Throughout 2025, Aave generated $885 million in fees, capturing more than half of the entire DeFi lending industry's share. Recently, the U.S. SEC concluded a four-year investigation into Aave without taking action, clearing a significant regulatory hurdle.
The crux of the contradiction is not that the protocol itself is not impressive, but how the immense value it creates should be distributed. As analysts have noted, this incident is a concentrated examination of Aave's existing governance structure and the boundaries of rights.
Currently, the proposal regarding brand control has entered the community voting phase. The outcome of this vote, as well as Aave Labs' subsequent response, will determine whether AAVE can quickly restore trust or fall into a prolonged internal strife.
After the crash, Aave's on-chain data still shows that substantial lending activities are quietly ongoing. The protocol's smart contracts are continuously processing deposits and loans, seemingly unaffected by the front-end turmoil.
For investors who entered at $150, their bets are not just on a technical rebound from an oversold condition, but also on the belief that this ancient powerhouse of the DeFi world has the ability to transform amidst the pains of governance and truly fulfill the original promise of 'decentralized finance.' The final answer will be written jointly by code and the community.
