Aave DAO Debates Conflicts of Interest, Opens Discussion on Protocol IP

DAO drama: Last week, a governance dispute at Aave exposed tensions between Aave Labs, the protocol’s core developer, and the Aave DAO. What followed was a week-long discussion centered on a key question: how should control and value be divided between a decentralized protocol and the centralized teams that build it.

• Why it matters: With around $55 billion in total value locked, Aave is DeFi's largest protocol and leading lending platform, controlling 59% of the market. For perspective, if Aave were a U.S. bank, it would be the 44th largest. How Aave resolves this dispute could set a precedent for how token holders and core developers divide control and economic rights across major DeFi protocols.

Aave’s financials: Year-to-date, Aave’s lending operations have generated around $110 million in revenue, all of which accrues to the Aave DAO and, by extension, AAVE token holders who control the protocol’s treasury. Beyond lending, the DAO has also earned fees via a swap integration embedded in the main Aave interface, which is operated and controlled by Aave Labs.

Silent change: Two weeks ago, that arrangement quietly shifted, when Aave Labs integrated another swap provider and began redirecting swap fees to itself without prior communication to the DAO. According to the delegate who identified the change, the impact could exceed $10 million in annual revenue redirected away from the treasury.

What Aave Labs says: Aave Labs argues the fees are needed to fund continued investment in the interface, which serves as the primary access point for users. Its core defense, however, rests on a structural distinction: the Aave interface is treated as a standalone product, not a protocol component governed by the DAO, and can therefore be monetized independently.

• “$AAVE aligned”: To signal alignment, Aave creator and Aave Labs founder Stani Kulechov announced the purchase of an additional $10 million worth of AAVE tokens and published a blog post reflecting eight years of building the protocol and outlining plans to further support its development.

The DAO’s response: The move did not settle the dispute. A governance proposal now under discussion seeks to place control of Aave’s brand assets, including domains, social handles, and naming rights, under a DAO-controlled entity, effectively shifting ownership of the protocol’s intellectual property to the DAO.

What’s next: Over the coming days, the community will continue gathering feedback ahead of a formal DAO vote that has yet to be scheduled.

Stéphane Daniel is a Founding Partner at d&a partners, a Paris-based law firm specializing in fintech and blockchain. The firm advised the leading lending protocol Morpho on its recent governance restructuring.

In Aave’s current structure, the DAO is essentially a group of governance token holders with no legal personality. As protocols mature and value accrues, this limitation becomes increasingly consequential.

This is why ownership structure matters. In advising Morpho on its governance setup, we recommended placing all IP, branding, and development inside a nonprofit association aligned with the DAO. In this model, the intrinsic value resides within the association, and the structure is designed to strictly separate interests, making it impossible for founders or backers to extract value.

For Aave, the situation serves as the ultimate “reality check” of its decentralization. If the DAO decides to reclaim IP or adjust economic control, that decision must be respected and enforced in the real world. Otherwise, governance is effectively worthless. That would erode trust in the DAO, weaken the Aave brand, and carry legal consequences. Because if a private company can override DAO decisions, regulators may view decentralization as cosmetic, jeopardizing eligibility for DeFi exemptions under MiCA.