A governance dispute within Aave has intensified over the allocation of an estimated $10 million in annual protocol revenue, sparking accusations that Aave Labs redirected fees away from the DAO. The controversy centers on a replacement of ParaSwap with CoW Swap on Aave’s primary interface and has already affected market sentiment for the AAVE token.
On-chain analysis led by delegate EzR3aL indicates the CoW Swap integration changed how swap fees are routed, replacing a ParaSwap referral model that previously credited the DAO treasury. The new flows reportedly include an additional 15 to 25 basis points on some swaps and appear to route fees to an address outside DAO control, a change delegates estimate could reduce DAO revenue by about $200,000 weekly—roughly $10 million annually.
A decentralized autonomous organization (DAO) is a governance structure that uses token-weighted voting to direct shared protocol resources and policy. These findings underpin the central allegation that fee mechanics were altered without explicit community agreement.
Marc Zeller, founder of the Aave Chan Initiative, described the actions as “stealth privatization,” asserting that roughly 10% of the protocol’s expected revenue is being rerouted and that Aave Labs is monetizing assets developed with DAO funding. Aave Labs’ founder Stani Kulechov offered a counterexplanation, saying prior ParaSwap fees were a “discretionary surplus” that Aave Labs had voluntarily donated to the DAO and arguing the front-end is a proprietary product the company may monetize.
Responses from Aave Labs and community leaders
He framed the switch as driven by user experience and improved MEV protection; maximal extractable value (MEV) is profit available to transaction sequencers by reordering or injecting transactions. Additional community concerns in the same thread include possible hardcoded fees in Aave Vaults, direct compensation from the Horizon product not shared with the DAO, and a proposed v4 liquidation engine that some warn could divert “tens of millions of dollars per year” in liquidation revenue.
The dispute exposed gaps in transparent communication and contributed to a fall in the AAVE token price of approximately 8% following public escalation. The controversy has coincided with other governance strains, notably a disputed token allocation involving WLFI and the withdrawal of Gauntlet, a risk steward, amid community friction. Together these events have amplified scrutiny of incentive alignment between the protocol’s institutional actors and tokenholders, and raised immediate questions about treasury sustainability.
The episode sharpens focus on revenue governance and front-end monetization within one of DeFi’s largest protocols; its resolution will hinge on community scrutiny and any formal governance action that addresses fee routing and revenue sharing.
