Author: Atomist Source: castlelabs Translation: Shan Ouba, Jinse Finance
Aave is the largest lending protocol in the DeFi space. With a total value locked of $26 billion and annual revenue of $140 million, it holds a 60% share of the DeFi lending market. Now, the question of how it got to where it is today has sparked heated debate on its governance forum: the founding company and the most influential representatives of the DAO have released conflicting narratives about the same period of history. Neither side is neutral; both possess significant governance power and financial interests in the resolutions soon to be voted on by token holders.
The following text, based on the original documents, reconstructs the full picture of the events.
On February 12th, Aave Labs released a framework proposal titled "Aave Will Prevail." According to the proposal, 100% of the protocol's product revenue will belong to the DAO, and Labs is requesting $42.5 million in stablecoins and 75,000 AAVE tokens as funding in the first year, totaling approximately $51 million. This funding represents 31.5% of the protocol's total treasury value and 42% of its non-AAVE reserves, and will be allocated entirely to a single service provider through a bundled vote. The framework also proposes formally establishing V4 as the future technical version of the protocol, suspending new feature development for V3, and planning to eventually abandon V3. Currently, V4 is still in the testnet phase, while all of Aave's revenue is generated by V3. Before the snapshot vote, community feedback requested: disclosure of relevant wallets, establishment of a foundation structure before fund disbursement, and linking the deprecation of V3 to the adoption milestone of V4. However, the vote proceeded without making any mandatory commitments to these points. Two Narratives On February 25th, two posts appeared on the Aave governance forum within hours. Aave Labs released a contribution report. Their narrative is that they created every protocol version from V1 to V4, flash loans, eMode, security modules, GHO, front-end interface, and branding. Since 2017, they have written over 570,000 lines of code. Regarding revenue attribution, their position is that the underlying architecture supporting various strategies originated from their original design, and attributing revenue to any single contributor distorts the actual operation of layered protocol development. ACI founder Marc Zeller released a financial breakdown analysis. According to his data, Aave Labs has accumulated $86 million in funding, including its 2017 initial coin offering, venture capital, DAO payments, and what he claims are exchange fees transferred from the DAO without governance voting. He traced 23% of the token supply to 52 wallets linked to the founding infrastructure. He calculated that for every $1 in revenue earned by Horizon, Aave Labs' institutional-grade real-world asset product, the DAO incurred approximately $24 in costs—based on $4.2 million in Merkl incentive expenses compared to only $216,000 in revenue. He listed six independent products he believes have failed or are still unprofitable, and claimed that 98% of V3's revenue comes from code delivered by BGD Labs and other DAO service providers, rather than development directly by Aave Labs. Both sides' arguments are well-founded and driven by self-interest. The core development team has left. Eight days after the "Aave will prevail" framework proposal was released, BGD Labs announced that its contract would expire on April 1st and would not be renewed. BGD developed versions V3.1 through V3.7, the liquidity eMode, and a crucial part of Aave's governance infrastructure. Their official reason for leaving was that Labs pressured V3 to promote V4 but failed to collaborate with BGD on V4 development, and imposed what BGD called "artificial restrictions" on V3 improvements. The team that wrote all the code supporting Aave's current revenue generation believed that the current environment was no longer suitable for them to continue working. They pledged two months of security support to handle major incidents, after which they would completely withdraw from the market in June. Market Background: Since the brand ownership dispute erupted in December 2025, the AAVE token price has fallen by approximately 32%. During the same period, Morpho, which waives protocol fees, has risen by approximately 42%. It's difficult to definitively say whether governance uncertainty caused this divergence or other factors played a dominant role. What is certain is that Aave has annual revenue of $140 million and is currently implementing buybacks, yet its token has lagged behind its direct competitors by over 70 percentage points in the past two months. Core of the Controversy: Putting aside the conflicting data, the core controversy is quite straightforward: Aave Labs, as the creators of the protocol, believe they should receive continued funding commensurate with their contributions. A coalition of DAO representatives argues that Labs is just one of many service providers and should be subject to the same accountability standards as other parties. Both positions are logically consistent. The tension between the two sides is not a dysfunction, but rather signifies something unusual happening at Aave. Most DeFi protocols don't have this problem. The founding teams of most protocols simultaneously act as DAOs, leading decision-making and receiving funding. In most cases, governance is merely a formality. Aave is different: it possesses a genuine ecosystem of technically capable and financially independent service providers (BGD, ACI, Chaos Labs, TokenLogic) capable of genuinely challenging the founding team's proposals. This is extremely rare. Building such a distributed contributor infrastructure is incredibly difficult, and most protocols have never achieved it. This conflict exists precisely because, regardless of how "Aave" is defined, it is inherently successful. The question now is whether the DAO can recognize its own strengths and weaknesses before voting. BGD's departure is the clearest warning sign. If the governance environment evolves into one where the best independent contributors leave because the Labs roadmap squeezes out all other space, then the distributed model that made Aave stand out may begin to crumble.