How AAVE will win

Governance
1

Hey everyone,

I wanted to share some thoughts on the recent developments in the Aave community and where I believe the Aave Protocol stands today.

We’re at a crossroads. Aave has grown within DeFi, and that foundation is critical to our success, but I’m concerned about our future growth trajectory. The existing DeFi market will keep growing, and we will continue to serve it and innovate within it. However, there are much bigger opportunities that we need to pursue simultaneously. I’m also concerned about the pace of innovation across the Aave ecosystem. We’re optimizing for a market that, while profitable, represents a fraction of the opportunity ahead.

Today, most of Aave’s lending is concentrated around ETH, BTC, or leverage-driven looping strategies correlated with crypto market cycles. When I started Aave (originally as ETHLend) in 2017, the vision was to use smart contracts to power lending across virtually all asset classes and use cases.

We are still far from that vision. I believe Aave has the potential to support a $500 trillion asset base through RWAs and other assets over the coming decades and onboard tens of millions of users through the Aave App. Well-capitalized TradFi companies and institutions are entering crypto and we need to continue dominating DeFi while expanding to new markets.

Focusing solely on our current market will not lead to the best long-term outcome for the protocol and token holders. This is not an insurmountable problem, but it must be prioritized and addressed.

Vision

First, the community needs a shared long-term vision. Without clear direction, we risk spending our energy on near-term debates or short-term incentives that undermine Aave’s long-term potential. A unified vision aligns contributors, focuses effort on what matters most, and ensures innovation is directed toward growing the overall pie.

That vision should focus on scaling Aave beyond its current crypto-native use cases. To achieve this, the protocol layer must evolve with the features and architecture required to support new asset classes and lending models, such as real-world assets, consumer-facing and institutional lending, etc.

Aave V4

Aave V4 is critical to this future. Expanding beyond purely onchain crypto collateral requires a modular architecture that can safely support new trust assumptions that can be properly isolated. Aave V4 allows use cases such as custom RWA-backed lending, borrowing via qualified custodians, or integration with margin and brokerage accounts, while preserving protocol integrity.

Horizon has already demonstrated the demand for RWA integration. Scaling these use cases further is best served by a modular design where liquidity can be pooled in hubs and risk profiles isolated through spokes. This insight comes from hundreds of hours of conversations with institutions. It allows innovation without compromising capital efficiency or safety.

There are also still great crypto-native use cases that are untapped and that Aave V4 can address. After the launch of Aave V4, we need an aggressive roadmap of features and use cases that increase economic activity and protocol revenue. We want to make Aave as open to developer innovation as possible while maintaining high security standards.

The level of innovation has not increased over the past couple of years, and this means lost opportunities for the protocol. This would be a big opportunity for service providers who have aspirations to contribute more.

As part of this roadmap, GHO should be a central point to tap into new sources of yield and credit opportunities with RWAs in the future, while using savings GHO as a universal savings primitive.

Collaboration and Values

The long-term goal is not only to capture a larger share of existing DeFi demand, but to grow the entire market by making Aave relevant within the broader financial system. Achieving this requires a new level of professionalism from the Aave community and its contributors. Our counterparties are financial institutions ranging from the biggest banks to fintechs to asset managers. In their eyes, internal friction or lack of an agreed upon vision translates into counterparty risk.

To realize the opportunity in front of us, we need to return to the values that brought us here: open source, developer maximalism, open and neutral protocols, privacy, access, and building for users.

These values have guided Aave since ETHLend. When we operate from these shared values, we create space for collaboration and innovation. When we lose sight of them, we create adversarial dynamics that serve no one. After nearly a decade of building here, we should be able to put the protocol and its users first.

Consumer Products and Scale

Reaching escape velocity for growth requires mainstream, consumer-grade products that can compete with traditional finance. Onboarding millions of users requires building products that abstract complexity while using Aave Protocol as infrastructure in the background. Developing such products is capital-intensive and involves product design, engineering, user acquisition, legal, compliance, and regulatory work.

We do not believe the DAO should directly fund these types of products. The application layer is permissionless, and it would be neither right nor scalable for the DAO to fund them or take on the associated risks. Moreover, the DAO does not currently have the capacity to fund user acquisition at the scale required to compete with TradFi companies, which spend hundreds of millions of dollars on growth.

World class consumer products are built by highly opinionated teams with the autonomy to move quickly. While decentralized governance works well for protocol economics and integrity, it is not suited for product-level decision making. Requiring product decisions to go through governance would slow execution and result in Aave being outpaced by faster-moving competitors.

We believe the most effective path forward is to allow opinionated teams to build products independently on top of the permissionless Aave Protocol, while the protocol itself captures upside through increased usage and revenue.

Alignment

That said, growing application-layer products directly increases protocol usage and protocol revenue. Products built on top of Aave taking their own fees does not exclude the protocol from making money. A self-sustaining company building on top of Aave Protocol can lead to the protocol making far more than it would otherwise.

Given the recent conversations in the community, at Aave Labs we are committed to sharing revenue generated outside the protocol with token holders. Alignment is important for us and for AAVE holders, and we’ll follow up soon with a formal proposal that will include specific structures for how this works.

Last, but not least, with respect to branding, we will work toward a structure in our upcoming proposal that supports this long-term vision with sufficient guardrails for the DAO and Aave token holders.

We all want Aave, including the token, to win and we’ll continue building out a comprehensive vision to make that happen.

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[ARFC] $AAVE token alignment. Phase 1 - Ownership
AL Development Update | December 2025
[ARFC] $AAVE token alignment. Phase 1 - Ownership
Aave Labs: $86 Million, 23% of the Token Supply, and this is their Track Record
2

Stani,

Thank you for taking the time to post this.

If this marks the beginning of a more open and constructive posture, it is welcome. Since this dispute became public, roughly $500M of $AAVE market cap has been erased. Correlation is not causation, but markets price uncertainty, and the lack of direct engagement on core questions amplified that uncertainty. A clearer willingness to discuss substance is the right direction.

At the same time, the DAO should stay clear-eyed about incentives and patterns. We have seen a recurring dynamic where initial asks are positioned in a way that is difficult for token holders to accept, then reframed later as a “middle ground” after backlash. We saw versions of this around the V4 budget conversation, around Horizon’s framing, and again in this debate. I won’t speculate on intent. The structure speaks for itself: control of gateways and comms creates a permanent leverage advantage, and the DAO keeps getting dragged into reactive mode. The DAO needs an immune system against that dynamic, or we’ll keep repeating the same cycle whenever control and monetization are at stake.

This is why the end state matters more than tone. Aave’s strategic brand assets and gateways should belong entirely to a DAO-owned vehicle. Stewardship can be delegated back to Avara under a clear operational mandate and security standards. Monetization terms can be negotiated in a way that is fair to everyone involved. But ownership is the only durable foundation that prevents a return to the same asymmetry: when ownership sits outside the DAO, any “understanding” is ultimately voluntary, and the protocol’s distribution layer can be redirected without notice based on private incentives, regulatory comfort, or capital structure needs.

One principle should guide the next steps:

“Vague statements without clear and concise commitments should be discarded as performative.”

With that lens, we acknowledge and welcome your statement as a step toward the negotiating table. If this is a genuine commitment to engage on Phase 2 terms in good faith, it materially reduces the need for a Phase 1 re-run, because Phase 1’s purpose was to establish a mandate to bring the current holder to the table. The community has already demonstrated the opposite of apathy: record engagement, a thin margin, and a clear signal that token holders want enforceable alignment, not a blank check.

Now the priority should be Phase 2, done properly and calmly. That means moving from broad positioning to concrete, enforceable terms, and being explicit on the legal vehicle that will hold the assets, how it is governed, and how it is protected from capture. In practice, this should cover:

  • what is being transferred (domains, handles, naming rights, trademarks, and related brand assets),
  • what is being licensed back for day-to-day use (scope and duration),
  • what operational and security standards apply to stewardship,
  • what guardrails exist on unilateral monetization changes,
  • what dispute-resolution and enforcement mechanisms apply if commitments are breached,
  • how the framework remains stable across cycles, even if incentives or corporate priorities shift,
  • and how token holders retain ultimate authority while day-to-day operators have clear mandates and accountability.

This is not about “winning” against anyone. Avara can thrive, and the DAO can thrive. But the structure must reflect reality: the DAO ecosystem has been the execution engine that kept Aave safe and dominant through multiple cycles, and it cannot remain structurally subordinated to unilateral control over the storefront and signage.

ACI is ready to help convene critical stakeholders for off-chain working sessions and translate the output into a clear Phase 2 proposal for the community to review. If we approach this with precision, enforceable commitments, and respect for governance process, Aave will come out of this stronger.

DeFi will win.

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I 100% agree with Marc and am glad to see Stani move in the right direction - but I am discouraged by Stani’s language here around “businesses being built on top of Aave taking their own fee does not exclude the protocol from making money”

We need 100% of all revenue going to Aave DAO with clear ownership rights and here’s why that is better for all parties from a financial standpoint:

With 100% of revenue going to the Aave token + ownership rights, it is worth much more from an enterprise value standpoint because with clear governance rights and certainty around cashflows the earnings multiple will expand and therefore be much more accretive vs. Aave labs taking revenue

Given the lack of standardization between revenue splits on various products and the uncertainty around IP rights, this corresponds to a level of uncertainty of the future cashflows of Aave DAO. As a result, both parties respective valuation multiples from an enterprise value standpoint will be much lower from an investor POV compared to simply accruing all the value to the DAO and giving Aave labs additional Aave tokens

Here’s a clear example

If there is $100M of total revenue for Aave Horizon let’s say at a 50/50 split which is the current set up - Aave Dao would get $50M and Aave Labs would get $50M. With Aave labs in control of branding etc, who is to say that will remain in the future? Who is to say that any new product developed around Aave has revenue routed to Labs instead of the DAO

Now investors cannot properly underwrite the future cashflows of Aave tokens and the entire protocol suffers

Keep in a mind a lower Aave market cap also discourages traditional asset holders from using Aave protocol

We also want to incentivize Aave Labs to continue doing great work expanding the product and doing business development. This should be done similar to how a CEO of any tech company is compensated : A salary determined by the board and equity (in this case AAVE tokens) - There should be zero revenue share between Aave Labs and Aave Dao as that ultimately takes away value from the Aave token as articulated above

This will ultimately make both the Aave Labs team members and Aave token holders much richer as the Aave token will accrue value much more significantly as it gains investor confidence and certainty

We need to model governance and valuation structures that have worked for hundreds of years in traditional finance while using the new crypto rails as a business model

Aave could be a darling of traditional finance talked about on CNBC, and other major media coverage bringing tons of investors and TVL - but the governance needs to be investor friendly

If stani wants to build businesses on top of Aave and not share 100% of revenue with Aave Dao then they should not have the Aave name, branding, etc, and should not get paid to do so out of Aave Dao treasury funds

**
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4

A welcoming step. wish we had taken such matured approach few weeks back instead of firing at each our in public platforms, that would have saved $500 MCAP of $AAVE.

anyways, it’s never too late to do the right thing.

Let’s fix AAVE

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What Consensys is for ethereum is what Avara should be for AAVE.

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We value the intent to come back and negotiate clear terms which will define the future of Aave, a mandatory step. Time to show the world Aave is anything but the FUD we could read on social networks around Christmas.

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Thanks for sharing the vision, Stani - the long-term direction makes sense.

One area that still feels a bit unclear is how value from products built on top of Aave is expected to flow back to the DAO and the AAVE token in a consistent and predictable way. More clarity here would really help from an investor and community perspective.

We’ve already seen the token drop around 20% recently, and reducing uncertainty around revenue, ownership and alignment would go a long way in restoring confidence and keeping the community engaged.

Looking forward to more detail on this! :slightly_smiling_face:

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I agree with Marc that markets don’t like uncertainty, and this uncertainty won’t only affect token holders, if it drags on, it will eventually hurt the entire ecosystem, including Aave Labs and Avara. I think Stani’s post is a step in the right direction, thank you for re-centering the discussion on long-term winning conditions.

To fully unlock the roadmap ahead (V4, GHO, RWAs), we should resolve the core “ownership / alignment” questions and remove the current grey area before the end of H1 2026.

I also strongly agree with Stani that UX/UI and day-to-day product decisions should not be governed by a DAO. We need speed and clear product ownership. Aave Labs has been doing great work, and I’m in favor of leaving them full autonomy on product execution and adoption.

Where we do need clarity is Aave-branded surfaces and any off-protocol monetization, revenue streams must be transparent and non-arbitrary, clear fee parameters, recipient addresses, and who has permissions to change them. Otherwise we risk recreating the worst patterns of TradFi and undermining the trust that holds this ecosystem together. If the DAO can be bypassed too easily, confidence breaks and that becomes systemic risk for everyone.

A pragmatic path forward could be:

  1. publish a public “revenue & permissions map” for Aave-branded surfaces,

  2. converge on Phase 2 guardrails (ownership vehicle where needed + stewardship mandate/SLA + security standards),

  3. implement off-protocol revenue sharing in tiers, so token holders benefit from a clear baseline while Labs can earn meaningfully more as adoption and net revenues hit defined milestones.

“DAO owns / builders build” feels like the right end-state, now we just need the enforceable structure to remove uncertainty and move forward.

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Why would we not incentivize Aave Labs with Aave token? Instead of siphoning off revenues?

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I agree with Stani, we need nimble teams to act fast and be an expert in what is best for the protocol. I wonder how much the split / current independence/friction between the DAO and Aave Labs actually hurts Aave the product long term. Does that hinder institutional adoption? How can we better align Aave Labs with Aave token?

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That’s a very great analogy

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Thanks Stani for this post and sharing your vision for Aave.
As hopefully the majority here, I also have no doubt that in order for Aave to succeed,
speed, full autonomy and ownership on product execution are needed.

This unfortunate recent episode has made clear that there are some actors (like ACI)
that are driven by personal egos and behave in irrational and unprofessional manner.
With the help of their lemmings, they tried to spread all kind of misinformation and false narratives (for example ridiculing the contribution of Aave Labs, etc.) and they proved to be willing to endanger all token holders to pursue their personal agenda.
As of today they still have not apologized for the damage caused.
I urge everybody to stay vigilant.

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I dont think posts like this are particularly helpful. Less finger pointing and more collaboration and progress moving Aave forward from all SPs please.

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14

Hello,

No one is reasonably arguing against that. I’d like to emphasize again that this proposal is about ownership and safeguards in the best interest of token holders.

This was already well understood, which is precisely why no one at Avara has tried to answer the core question below. The answer is becoming obvious to everyone.

On this topic, we should also recognize a simple fact: a DAO-led Aave has delivered the largest growth period in protocol history, and Aave has maintained dominance, being larger than all competition combined. Aave has it is operated today has won major CeDeFi and institutional deals thanks to to coordination and support of multiple parties, Avara, Tokenlogic and ACI leading them.

We should also be careful not to give oxygen to the narrative pushed by our competitors that decentralization is inherently inefficient. Market data over the past three years shows the opposite: a focused DAO, executed through high-performing service providers and aligned with token holders, has been a success story.

The goal here is to fix a structural asymmetry that is hurting Aave’s chances, both as a token and as a protocol, to reach its full potential. Then we can all get back to what we do best: building the future of finance together.

To avoid this thread turning into another hundred-reply spiral, I invite the community to allow some time for key participants to work together off-chain and come back with a consensus solution that benefits everyone.

Until then, and with the original proposal author’s @eboado consent, we will let Avara confirm their willingness to build together by supporting a Phase 1 re-run Snapshot, while working with us on a clearly defined, genuinely value-add Phase 2.

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My observations:

  1. Stani chose to compromise when its practical interests were affected. AAVE Labs’ reputation has clearly suffered as a result of this incident, and the price of AAVE has plummeted. If Stani had realized its mistake earlier, it should have actively discussed and addressed everyone’s questions much sooner.

  2. The escalating governance issue is essentially caused by AAVE Labs: repeated infringements on the DAO’s interests finally pushed us to our breaking point; lack of communication; refusal to directly answer questions; and an overbearing attitude towards everyone.

Facts that must be clarified:

  1. No one truly wants to remove AAVE Labs, nor does anyone deny the significant contributions AAVE Labs has made; it is you who have provoked public anger.

  2. Without AAVE Labs, there would be no AAVE. No one wants to affect the execution capabilities of AAVE Labs and Stani. We know you’ve done a great job. The recent AAVE app is a crucial strategic move, and we admire Stani’s vision; we trust him.

My suggestions:

  1. AAVE Labs and Stani are not ordinary service providers; they are the founders of AAVE. Their interests must align with DAO’s to avoid conflict. The repeated infringements on DAO’s interests stem from this misalignment. Are there any other good solutions we can consider? For example, could DAO directly acquire AAVE Labs? Let’s work together to find a solution. Aligning interests is essential to fundamentally solve the problem.

  2. If, according to consensus, the brand, IP, and domain name should belong to DAO, then give them to DAO. Other specific implementation details and issues can be discussed in a meeting.

  3. As the largest DeFi protocol, any changes to AAVE will significantly impact the entire DeFi space. User funds are held within the protocol; any action must be cautious and rational, not act like an immature child. Major proposals regarding AAVE require discussion among the DAO, AAVE labs, various service providers, and token investors to weigh the interests of all parties and ultimately reach a solution acceptable to everyone. Online and offline meetings can be held, and communication and coordination should be strengthened.

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Good question. Incentivizing Aave Labs is important but paying a company primarily in AAVE is not efficient. Labs has fixed OPEX (salaries, infra, legal, compliance), mostly denominated in fiat/stables. If we fund those costs with AAVE, they’ll need to sell AAVE to operate, creating structural sell pressure and a negative market signal (“dumping”). For me as a token holder it’s important to not create a selling pressure.

Also, the core issue isn’t “siphoning” it’s ensuring any Aave-branded monetization is transparent, rule-based, and governed with clear guardrails, so the DAO can’t be bypassed and market uncertainty goes away.

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What makes blockchains and smart contracts great is the ability to build independent apps and businesses on top of them, without permission or gatekeeping, while charging your own fee. Vaults, aggregators, wallets, etc. all help grow the pie together.

But you can’t say the vision is to bring $500 trillion of RWAs onchain while refusing to bring basic RWAs like the brand IP, domains, and interfaces. This is a huge risk for AAVE holders. If the brand and UIs can be acquired privately, you can rug all of us, driving customers and LPs to a new backend. You’d essentially have permanent veto power because of this threat.

We’re all working to build the brand together. I’ve onboarded countless people to Aave and advocate for it constantly, but that feels worthless now that I realize I don’t own any of it as an AAVE token holder.

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Hopefully all the key players are communicating off chain and the solution will be fair to everybody involved. Aave is one of the few that really survived the last 8-9 years in the cryptoverse and came out on top, lets all make effort that it lasts and thrives.

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Smart contracts solve financial “trust cost” issues, replacing intermediary credit with tamper-proof code for automated execution without third parties. DAO governance addresses “power ownership”, putting protocol decisions fully in token holders’ hands. Only DAO-governed DeFi can escape centralized control to be the core of true “autonomous finance”. In short, without DAO, there is no DeFi.

If AAVE maintains stable operation and continuous innovation, it can not only leverage its mature lending infrastructure in the RWA wave to efficiently connect on-chain funds with off-chain physical assets and release financial efficiency, but also become the core hub for large-scale economic interactions among AI agents in the next decade or so, sharing the dividends of the era. For AAVE to gain a foothold in the global financial landscape of the future, the current governance structure is crucial—while the team’s innovative execution capability is important, as a DeFi protocol, it must never deviate from DAO governance and control. Losing decentralized decision-making power, even the grandest goals will be empty talk. We hope the team can resolve governance disputes soon, allowing all participants including institutional investors to focus on the protocol’s development with peace of mind. A clear governance structure is the foundation for the protocol’s long-term stability and progress; may all parties recognize this.

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They should be paid like any CEO would

A cash piece to pay living expenses (in this case Labs OPEX) and then equity that is vested over time (in this case AAVE) in incentivize alignment and give large upside potential for delivering value

The most successful CEOs make the majority of their wealth from equity not cash salary

1 Like