Ownership tokens

Author: Nishil Jain & Translation: Block unicorn

Foreword

In 1602, the Dutch East India Company introduced the limited liability company, revolutionizing everything. It invented a way of financing where one could profit from the company's profits simply by holding shares. This separated ownership from actual management.

Today, we can clearly see the division of power in large publicly traded companies like Microsoft or Apple. Shareholders own a share of the company's assets and profits; board members approve the budget on behalf of shareholders; and the CEO is responsible for the company's day-to-day operations.

However, this structure took decades to develop.

Before the advent of corporations, if you wanted to trade spices in India, you had to build an entire ship out of your own pocket. If the ship sank, you would be personally bankrupt. Creditors could even seize your house or send you to prison. In 1602, the Dutch East India Company changed the investment landscape. Investors no longer financed individual voyages but instead purchased "shares" in the company itself. This created limited liability: if the company went bankrupt, you only lost your invested capital. Your house and bed remained intact. At the time, there were no written laws to protect investors' interests. Therefore, as railways spread across the globe and companies grew larger, "corporate predators" and "robber tycoons" emerged. They often deceived investors, printed fake shares, and even misappropriated company funds for personal use. Shareholders ultimately suffered losses, while the company owners lived in opulent mansions. This led to distrust among shareholders and a stock market crash. The 1929 stock market crash was a turning point. Governments around the world realized that economies would collapse if people lost trust in the financial system. This led to the establishment of the U.S. Securities and Exchange Commission (SEC) and the modern fiduciary duty system. Today, the rules protect you. Transparency: Publicly traded companies must publish audited financial statements (10-K) annually. Anti-fraud: Lying to shareholders to inflate stock prices is a federal crime. Valuation rights: If a company sells at an unusually low price, shareholders can sue to claim the "fair value" of their shares. Did Aave really hide $10 million? On-chain governance is currently somewhere between 19th-century corporate fraud and legal protections for shareholder rights. Especially within the Aave DAO, participants are engaged in ongoing discussions and proposals, attempting to answer a question that on-chain DAOs have never been able to answer: Who owns the protocol, and who controls it? Theoretically, this is a simple question, but coordinating different interests often complicates matters. The catalyst for the Aave governance debate was a $10 million deal. For years, the Aave DAO and Aave Labs maintained a mutually understanding coexistence. The DAO funded the protocol, while the Labs built the interface. However, this peace was shattered in December 2025 when DAO members discovered that $10 million in annual Swap fees, which should have flowed into the DAO treasury, had been unexpectedly transferred to a private wallet belonging to Aave Labs. Previously, Labs replaced ParaSwap with CoW Swap in its official Aave frontend, changing the value accumulation mechanism from ParaSwap referral fees to CoW Swap frontend fees. Essentially, interface fees have always been the most obvious monetization option for teams utilizing underlying protocols—we can see this in Uniswap Labs and now Aave Labs. If a team is perceived as profiting from public resources (user liquidity) without rewarding users, it can damage token holders' perception of the entity. Token prices could plummet overnight because users will have no reason to continue holding them. Conversely, a team that continuously sells its governance tokens to incentivize developers and manage its operating expenses demonstrates a willingness to relinquish control of the protocol in exchange for a longer operational lifespan. This disconnect between governance and incentive mechanisms is precisely why interface fees have become prevalent in protocols that have grown significantly in scale. Labs' technical rationale is that since they developed the front-end, they should retain its revenue. However, no one had previously formally drawn this line. Token holders have consistently argued that all of Aave's intellectual property and brand value, along with the resulting interface revenue, belong to the DAO. Labs, on the other hand, believes that interface operation is their responsibility. Surprisingly, these two assumptions have coexisted for several years. By the end of December, DAO members had submitted two proposals. One came from Ernesto Boado, former CTO of Aave Labs. He proposed transferring intellectual property and brand ownership to the DAO and distributing all its revenue; while Stani presented Aave's vision roadmap, which implicitly acknowledged the necessity of maintaining the existing power structure. Five days after Boado proposed the initiative, Aave Labs upgraded it to a snapshot version without his knowledge or consent, and scheduled a vote from December 22nd to 25th, ending on Christmas Day. Boado publicly condemned the move and urged supporters to abstain. The vote ended with 55% against and 41% abstentions—only 4% voted in favor. By this time, AAVE's price had already fallen by 25%, wiping out approximately $500 million in market capitalization. The price volatility was due to uncertainty surrounding the underlying token's value. If Stani and his team were able to influence the DAO, what would be the token's true value? The Aave protocol has grown into a $2 billion project, yet it fails to answer some fundamental questions. Does the DAO own the Aave brand? Is Labs serving token holders, or collaborating with them? Both sides have valid arguments. Labs built the interface and dealt with a four-year SEC investigation while incurring ongoing operating costs. Token holders funded development, paid for rebranding, and provided the liquidity that gives the brand value. The protocol is open source; anyone can build a similar interface. But users choose aave.com because of the brand recognition the DAO helped build. The problem is that these two positions are essentially the same. Traditional corporate law spent decades building a framework to address the ownership and control dilemma. DeFi skipped this process, and the governance collapse we are seeing now is the price we are paying for it. Different protocols attempt to solve the same fundamental problem in different ways. DeFi Governance Issues Hyperliquid directly eliminates governance issues. 97% of transaction fees are directly used for HYPE token buybacks through an aid fund. In just over a year, the protocol has completed over $700 million in token buybacks. Meanwhile, the team has complete operational autonomy. The codebase is closed-source. The buyback mechanism is not regulated by a DAO. However, token holders do not need to trust the management's intentions because the value-sharing mechanism is encoded in the protocol itself. Although token holders do not participate in governance strategy development or own the underlying protocol, they automatically benefit from the platform's growth, and this mechanism appears to be working well so far. Uniswap also experienced its share of setbacks. The team spent five years navigating the issue of aligning the interests of token holders. While the fee switching mechanism has existed in the codebase since 2020, it was never actually implemented. The "UNIFication" proposal in December 2025 resolved this ambiguity: 100% of protocol fees are now used to burn UNI, and Uniswap Labs has eliminated its interface fees and retroactively burned 100 million UNI to make up for lost value accumulation over the years. Uniswap Labs owns the brand and intellectual property and is responsible for product development; meanwhile, the DAO owns the smart contracts and controls revenue and underlying funds. Jupiter attempted community governance from 2024 to mid-2025, but the team ultimately decided to suspend it. For months, debates over airdrop allocations and team funding distributions led the team to suspend DAO voting in mid-2025, citing a "collapse of trust" and a "perpetual cycle of FUD (fear, uncertainty, and doubt)" hindering product development. Their 2026 "green transition" framework narrows the scope of community decision-making while implementing a token-holder-friendly economic model through zero net emissions and reduced dilution. This is similar to Hyperliquid's direction, where token holders benefit from protocol revenue, but brand ownership and control remain with the team. Most of the aforementioned teams are pursuing economic alignment with token holders, while ownership and control of the interface remain with the protocol team. Will Aave (Labs) prevail?

Aave's "Aave Will Win" framework, released in February 2026, attempts to pave a more forward-looking path—achieving a balance of economic benefits based on brand intellectual property. The protocol promises that all revenue—including product revenue, transaction fees, API revenue, and institutional service revenue—will flow into the DAO's coffers.

In exchange, Labs will receive $42.5 million worth of stablecoins ($25 million in initial funding and $17.5 million in milestone payments), 75,000 AAVE tokens, and a license to develop V4. Simultaneously, the Aave Foundation will hold the brand intellectual property and be subject to DAO oversight.

DAO members consider this a costly move, and their concerns are not unfounded. The amount raised in stablecoins alone accounts for 42% of the DAO's non-AAVE reserves. The total raised amount of approximately $50.7 million represents 31.5% of the entire treasury. Furthermore, 75,000 AAVE tokens will increase Labs' voting power, but the exact percentage remains unknown. Beyond the source of funding, the proposal is also vague regarding the ownership structure of the Aave Foundation and whether it has decision-making power independent of Labs. Even the 100% profit distribution remains ambiguous, and it assumes that all parties trust Labs to provide accurate and complete profit information. In short, the proposal reflects a high degree of trust in Aave Labs. Given the events that led to this proposal, trust is becoming increasingly scarce in the relationship between the DAO and Labs. Whether the proposal is reasonable depends on the value proposition that the governance token should have provided. If its value proposition is "trust-based fairness," then Aave's framework can achieve this. If the value proposition is "achieving fairness through enforcement-based community control of protocol intellectual property," then the framework will not achieve its goal. Looking ahead, a growing trend in DeFi protocols is that the way economic benefits are realized is changing; token holders' primary interest is no longer governance rights, but rather the way economic benefits are realized. Hyperliquid's buybacks, Uniswap's fee burning mechanism, Jupiter's suspension of governance while maintaining economic consistency, and Aave's proposed revenue redirection scheme based on trust-based brand ownership—each represent a shift from active governance to passive value accumulation. This is similar to traditional corporate governance. Shareholders don't directly run the company; instead, they elect a board of directors to vote on major transactions. They also receive dividends and can sell their shares if they disagree with management. Operational control remains with management. Corporate law evolved into this separation because alternatives for shareholder-driven operational decisions couldn't be extended beyond small partnerships. DeFi is shortening the traditional timeline. The question is whether the DAO model can withstand the test of ownership issues, as it must answer a question it has avoided since its inception. Aave is drafting the first version of that answer.