Aave Labs vs Aave DAO: Who is Harvesting the Value of DeFi? A Warning of Governance Power Struggle

The Aave ecosystem is facing an invisible power struggle. From switching CoWSwap, deploying Horizon, to the MegaETH partnership, these may appear as routine product iterations on the surface, but they reflect a deeper issue: Who owns Aave, who profits from it, and who bears the risks?

Symptoms: Tenfold Disparity in Revenue Distribution

The issue began on December 4th. Aave Labs switched the default swap integration on aave.com from ParaSwap to CoWSwap. This seems like a minor product adjustment, but it triggered collective community awareness.

The reason is simple: Funds are flowing to different places.

During the ParaSwap era, the swap fees (about 15-25 basis points) went into the Aave DAO treasury. This was an invisible revenue stream. But after integrating CoWSwap, these fees are directed to wallets controlled by Aave Labs. According to community representative EzR3aL’s calculations, with an estimated weekly swap volume of $200,000, the DAO loses at least $10 million in annual revenue.

This is not a small number. It’s equivalent to the DAO voluntarily giving up a significant income stream.

Root Cause: The Dilemma of Vague Ownership in DeFi Governance

Aave Labs’ response is straightforward: Protocols and products are two different concepts.

In their view, aave.com as a frontend interface is an independent product operated by Aave Labs, bearing security costs and maintenance expenses. The DAO manages the on-chain protocol itself, not the brand or user interface. Legally, this makes sense — the DAO is not a legal entity and cannot own trademarks or enforce rights in court.

But the community’s logic is different. Where does the value of the Aave DAO come from?

• The DAO carefully manages risk parameters
• Token holders bear all the protocol’s risk exposure
• DAO funds support an entire service provider team
• The protocol has remained resilient despite multiple security incidents
• The AAVE brand represents safety and reliability

In other words, the DAO ‘pays the bill’ for the Aave brand — not with money, but with governance, risk, and time. From this perspective, why should the profits generated by this brand be exclusively owned by Labs?

This triggers a classic paradox in DeFi: The alignment of interests between Equity and Token.

When Aave Labs, as a private entity, gains DAO token rights through issuing and self-distributing AAVE tokens, it can profit from token appreciation. But it doesn’t share in DAO losses, and risk management is handled by the DAO. If Labs can additionally extract value from on-chain products, an unequal利益关系就形成了。

Benchmark: Lessons from Uniswap

This script is not the first time played out in DeFi.

Uniswap Labs and the Uniswap Foundation once followed the same path. When Uniswap Labs tried to extract additional revenue from the frontend interface, the Foundation and token holders raised similar concerns. What was the final outcome? Uniswap Labs made concessions, completely eliminated frontend fees, and all revenue flowed to UNI token holders.

Why did Uniswap make this choice? Because, in the long run, maintaining the token’s value proposition is more important than short-term product revenue.

Greater Risks: The Power Play in Aave V4

The controversy has escalated now because Aave V4 is imminent.

V4’s core design philosophy is shifting complexity from users to an abstraction layer. In other words, more routing, more automation, more product layers between users and the core protocol. What does this mean? Control over user experience = the power to create and extract value.

Specific cases are piling up:

Horizon Project: This RWA experiment cost the DAO $500,000 in incentives but only generated $100,000 in revenue. A net loss of $400,000. Moreover, it consumed tens of millions of GHO tokens to maintain the peg, costs invisible to token holders.

MegaETH Deployment: Aave Labs bypassed the ongoing protocol service provider scheme and negotiated directly with MegaETH. In return, Labs will receive 30 million MegaETH points. These points “may” be allocated as incentives to V3 markets, but ownership and decision-making rights are controlled by Labs.

Aave Vaults: These ERC-4626 wrapped products are not illegal per se, but if they become the default user experience in Aave V4, a Labs-branded and managed product will serve as a channel between users and the protocol, extracting fees. Users think they are using “Aave,” but in reality, they are using a Labs’ independent product.

Systemic Trust Overdraft

Deeper issue: Lack of transparency.

When DAO funds or brand assets are used for products operated by private entities, the community needs clear protocols and visibility. But what’s happening now is that more and more DAO-invested projects are generating negative returns, while Labs profits from various off-chain protocols and incentives — benefits that the community cannot see.

This model fosters an invisible outflow of value. Not just the $10 million/year from CoWSwap, but the marginal gains across the entire ecosystem are being redirected.

The Way Forward

This is not just an Aave issue; it’s a governance issue across DeFi. Whether equity and tokens can coexist peacefully depends on a fundamental principle:利益必须对齐。

Clear answers are needed:

• What are the rules for distributing product revenues?
• Where are the boundaries for using brand assets?
• How are responsibilities between service providers and the DAO defined?

Uniswap has already provided an answer. Aave now faces a choice: maintain the status quo, risking community trust erosion, or, like Uniswap, redefine the cooperation framework between token holders and Labs.

The latter may limit Labs’ short-term income, but in the long run, a highly transparent,利益对齐的Aave生态系统 will support the value of AAVE far beyond the immediate gains.

The same question now faces all DeFi projects: Are you creating value for token holders, or for yourself? The answer determines how far this project can go.