AAVE fell 10% early in Monday’s Asian session after a $50 million sell-off triggered by heightened governance tensions.
The plunge comes amid allegations that Aave Labs, a company led by founder Stani Kulechov, diverted millions of dollars in swap fees from the DAO treasury without the approval of token holders, sparking a debate over decentralized governance and founder control.
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Amid the DAO governance drama and revenue controversy, the price of AAVE has fallen more than 10% in the past 24 hours, trading at $159.86 at the time of this writing.
The controversy centers on Aave’s integration of CowSwap into its frontend, replacing ParaSwap. Critics claim the change, completed after Aave Labs received a grant from CowSwap, cost the DAO up to $10 million in potential annual revenue.
An open letter from Orbit representatives states that the ParaSwap integration generated approximately $200,000 per share for the DAO.
Members of the DeFi community argue that redirecting these fees undermines the DAO’s decentralized governance model.
Stani Kulechov and Aave Labs argue that front-end operations revenue is separate from core protocol revenue and is always voluntary.
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Nonetheless, questions remain about the dual role of the CEO and control of protocol assets, raising concerns about potential conflicts of interest.
DAO sort suggestions are moved to snapshots.
To resolve the crisis, Kulechov moved the controversial DAO coordination proposal to Snapshot for an official vote.
The plan aims to transfer key brand assets, including domains and social media handles, from Aave Labs to the DAO.
“People are tired of this debate and voting is the best way to resolve it. This is governance after all,” Kulechov said, urging token holders to participate.
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However, market confidence appears to be low. Polymarket odds give the proposal just a 25% chance of passing, down 26 points from earlier this week.
Community members like Tulip King have suggested that AAVE prices could fall even further if the vote fails.
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Impact on Markets and Governance
This episode highlights the broad challenges facing DAOs in aligning incentives between developers, service providers, and token holders while maintaining true decentralization.
Critics point to alternative models such as Hyperliquid, where almost all revenue is allocated to token buybacks and team rewards are paid in native tokens, as potential examples for Aave to follow.
“Perhaps you should look at Hyperliquid, where 99% of profits go into HYPE buybacks. The team holds them and gets paid out in HYPE. Everyone wins. Why can’t Aave Labs do the same? Is the pie already big enough or is the DAO inherently flawed?” Analyst Duo Nine posed.
Snapshot voting requires a quorum of 320,000 YAE votes and a minimum margin of 80,000 votes for competing options. Voting will take place over three days, giving token holders time to consider the next steps for the protocol.
Meanwhile, the sale of AAVE highlights market concerns about governance transparency and whether token holders can trust that protocol profits serve the DAO and not private interests.
As the community polls, the results could set an important precedent for Aave and the broader DeFi ecosystem.