The final result of this governance process will have a significant impact on how Aave establishes a stable balance mechanism between the core development team's incentives, brand control, and the long-term interests of token holders in the future.
Author: CoinW Research Institute
Source: MarsBit
Recently, the Aave community has encountered governance disputes regarding the attribution of front-end commercialization revenue, triggering a re-discussion of governance structure and business boundaries. In this round of governance disputes, the development entity Aave Labs integrated CoW Swap into the application front end, and the new fees generated from related transactions directly flowed to the address controlled by Labs, leading to community disputes over income transparency, brand asset attribution, and governance boundary issues. In response to this issue, the community formally proposed the ARFC proposal, with the core demand being to clarify the governance attribution of Aave brand assets and to require that related intangible assets, including domain names, social media accounts, and brands, be uniformly transferred to DAO management. Currently, this proposal has entered the Snapshot voting stage, with the voting window from December 23, 2025, to December 26, 2025. The current voting results show that the opposing votes amount to about 494800, accounting for 64.15%. From the phased voting structure, there are still significant differences within the community regarding the direct transfer of brand assets to DAO control. The final result of this governance process will have a significant impact on how Aave establishes a stable balance mechanism between the core development team's incentives, brand control, and the long-term interests of token holders in the future.
1. Project Overview
Aave is currently one of the largest and most mature decentralized lending protocols. After years of iteration, Aave's TVL has exceeded $33 billion, capturing about 60% of the DeFi lending market. Its core value lies not in a single lending product but in building a non-custodial, permissionless on-chain liquidity market. On December 2025, the SEC of the United States officially concluded its years-long investigation into Aave without taking enforcement action, alleviating compliance uncertainties and promoting Aave's evolution from a DeFi protocol primarily serving crypto-native users to a more compatible on-chain financial infrastructure, positively demonstrating expectations for compliance in the overall DeFi space. Aave founder Stani Kulechov recently established his three major strategies for 2026: first, the comprehensive implementation of Aave V4, unifying cross-chain liquidity through a Hub-Spoke architecture, aiming to break down funding barriers between different public chains; second, the large-scale expansion of Horizon RWA, which has currently reached a net deposit of $550 million, planning to introduce global asset categories such as US Treasuries, ETFs, and commodities to the on-chain by 2026 through partnerships with institutions like Circle, Ripple, and Franklin Templeton, targeting a breakthrough of $1 billion in scale; third, the comprehensive promotion of the Aave App, dedicated to transforming complex lending operations into a mobile savings application.
2. Market Dynamics
Currently, the ARFC governance proposal within the Aave community shows significant divergence and has quickly attracted market attention. This proposal was put forward by the former Chief Technology Officer of Aave Labs and current co-founder of BGD Labs, aiming to systematically clarify the governance ownership of Aave protocol's intangible assets, requiring the core assets, including domain names, official social media accounts, code repositories, and the naming rights of the 'Aave' brand, to be unified under Aave DAO management. The direct background of this proposal is the community's questioning of the arrangement regarding the control of some protocol fees and brand assets, which was not authorized by the DAO, leading to the protocol's commercialization benefits not effectively returning to the token system, viewed by some holders as undermining the value of the AAVE token. This issue has sparked ongoing discussions in the governance forum. On December 22, without the community discussion fully converging, the proposal was directly advanced to Snapshot for off-chain voting, with the voting period set from December 23 to December 26. Since the voting window coincides with the Christmas holiday, many governance participants raised objections to the process arrangement, believing it might affect token holders' participation and the quality of governance negotiations.
From the current voting progress and market feedback, this governance event has had a substantial impact on short-term sentiment. As of now, there are approximately 494,800 opposing votes, accounting for 64.15%; about 253,400 abstaining votes, accounting for 32.85%; and approximately 23,200 supporting votes, accounting for 3.01%, showing significant divergence within the community regarding whether brand assets should be directly transferred to DAO control. During the voting process, clear risk mitigation behaviors also emerged on-chain. On December 22, a long-term holder of AAVE, an on-chain whale address, sold its holdings of 230,000 AAVE in batches and converted the funds to stETH and WBTC, causing AAVE's price to pull back about 10% in a short period, reaching a low of $156. However, the market generally interprets this sell-off as a phase of risk aversion due to governance uncertainty, rather than a denial of Aave's protocol fundamentals or long-term competitiveness.
3. Team Background
Aave originated in 2017, and its founder and CEO Stani Kulechov is one of the early entrepreneurs systematically building on-chain financial infrastructure in the DeFi space. Stani has extensive entrepreneurial experience in the fields of crypto and fintech, actively contributing to DeFi ecosystem development. At multiple critical nodes, he has elaborated on the long-term positioning and development direction of the protocol, including V4 architecture upgrades, institutional-grade lending capability building, RWA integration directions, and application layer layouts aimed at a broader user base.
On the execution level, the technical development and product advancement of the protocol are mainly undertaken by Aave Labs, which is responsible for the development, upgrading, testing, and ecological expansion of core contracts, emphasizing open-source, modularity, and composability in its design philosophy. Meanwhile, Aave's governance and strategic direction are not unilaterally decided by Labs but are coordinated and adjudicated by Aave DAO as the governance body through on-chain and off-chain governance processes. Aave DAO is composed of token holders and is responsible for voting on major parameter adjustments, fund usage, protocol upgrade directions, and brand-related matters. Around the division of labor and boundary of rights and responsibilities between Aave DAO, Aave Labs, and the broader community, the protocol has formed an operational framework with DAO as the governance body and Aave Labs as the execution body, while the recent ARFC proposal's introduction is precisely a governance discussion centered around certain asset and authorization issues within this framework.
4. Token Information
The native token AAVE of Aave has a total supply of 16 million tokens, with approximately 15.19 million currently in circulation, and the circulation ratio is close to the upper limit, leaving limited new inflation space. Under this background, the value of AAVE depends more on its functional positioning in governance, risk-bearing, and protocol cash flow distribution. In terms of governance, AAVE is the core governance token of Aave DAO, allowing holders to participate in proposal discussions and voting, including ARFC; regarding risk and reward mechanisms, AAVE bears the systemic risk function of the protocol through a security module. According to the latest development direction, Aave is advancing the upgrade of the Umbrella module, introducing a more refined risk pricing mechanism, enabling stakers to share interest or fee income from V4 architecture and RWA-related businesses while providing security backing for the protocol. Additionally, in terms of value capture, Aave has begun to normalize the execution of a 'buy and distribute' strategy, where part of the net income generated from lending activities is used to repurchase AAVE in the secondary market and distribute it to protocol contributors and staking participants, establishing a more direct linkage between token value and the protocol's real cash flow.
5. Competitive Landscape
Aave has long been regarded as one of the representative protocols in the DeFi space with a relatively mature governance structure and high execution efficiency. However, as the protocol's scale, brand influence, and commercialization needs continue to expand, the organizational complexity carried by its governance framework has increased, and the original model has gradually revealed structural tensions. On one hand, the protocol's value highly depends on the consensus foundation formed by the DAO community, TVL, and network effects; on the other hand, important matters such as front-end operations, product iterations, compliance exploration, and institutional cooperation still heavily rely on the centralized decision-making and execution capabilities of professional teams at critical nodes. This structure, which coexists decentralized governance with centralized execution, poses higher demands on existing boundaries of rights and responsibilities as the protocol enters a mature stage. However, from the results reflected in the current governance vote, opposition dominates, with abstentions at 32.85%, indicating that the community does not fully endorse a relatively hurried governance approach to conduct a one-time, structural adjustment of front-end commercialization benefits and brand asset ownership.
From the perspective of the competitive landscape, Aave's current governance controversy contrasts with Uniswap's recent governance progress on protocol revenue and token value capture mechanisms. Uniswap has promoted the activation of the protocol fee switch through the UNIfication proposal, and upon approval through DAO voting, part of the transaction fees will be reintegrated into the protocol system for the continuous destruction of UNI tokens, while simultaneously executing a one-time destruction of treasury tokens. This mechanism establishes a direct correlation between UNI's economic value and the actual trading volume and fee income of the Uniswap protocol, with related fee ratios, destruction paths, and execution methods all maintained through governance processes, also aligning the interests of the team and the community. From a more fundamental level, this is not an isolated event, but rather different solutions to token economics and protocol management among leading DeFi protocols during the scaling phase. If Aave can form equally clear, executable, and institutionally binding governance and revenue arrangements in the current game, its competitive advantage is expected to strengthen further; conversely, if governance divergences remain in a state of unclear rights and responsibilities for an extended period, even maintaining a lead in technical and liquidity aspects, the uncertainties on the organizational and institutional level may gradually transform into competitive disadvantages.
