Aave's Governance Turmoil and the Future of On-Chain Revenue Alignment

The decentralized finance (DeFi) protocol Aave has long been a bellwether for governance innovation, but its 2025 governance crisis has exposed deep fractures in its alignment of incentives. At the heart of the turmoil lies a contentious debate over control of off-protocol revenue streams and intellectual property (IP) ownership. Aave Labs founder Stani Kulechov's proposed revenue-sharing framework, aimed at distributing income from the official Aave app and future products to AAVE token holders, has sparked both hope and skepticism. This analysis evaluates whether the framework can restore trust, resolve governance tensions, and unlock token value-or if it risks entrenching centralization under the guise of alignment.

The Revenue-Sharing Framework: A Step Toward Alignment or a Centralization Play?

Kulechov's proposal seeks to redefine the relationship between Aave Labs and the Aave DAO by formalizing revenue-sharing mechanisms for off-protocol income, such as frontend swap fees and brand monetization. The framework also aims to clarify IP governance, ensuring that key assets like domains, social media accounts, and trademarks require DAO approval for monetization. Proponents argue that this structure could create a more equitable distribution of value, particularly as Aave expands into real-world assets and institutional markets via upgrades like Aave V4 and the GHO stablecoin.

However, critics have raised red flags. The December 2025 vote to transfer brand assets to the DAO was rejected by 55.29% of voters, with detractors accusing Aave Labs of prioritizing its own interests over community governance. Ernesto Boado, the original proposal author, called the rushed vote a "breach of governance norms," while Marc Zeller of the Aave Chan Initiative labeled it a "hostile takeover attempt". These tensions highlight a broader concern: even as the framework promises transparency, the centralized control of revenue-generating assets by Aave Labs could undermine trust.

Stakeholder Reactions and Market Implications

The market has reacted ambivalently to the proposed framework. AAVE's price surged over 10% following the initial announcement, reflecting optimism about potential alignment between the DAO and Aave Labs. Yet this optimism was short-lived. The rejection of the brand asset transfer proposal and allegations that $10 million in fees were directed to a private Aave Labs wallet rather than the DAO treasury triggered a 22% price drop. Such volatility underscores the fragility of trust in the ecosystem.

Kulechov has defended Aave Labs' actions, citing the protocol's $140 million in 2025 revenue-surpassing the combined total of the previous three years-and emphasizing that his $15 million AAVE token purchase did not influence governance decisions. While these disclosures aim to bolster transparency, they have done little to quell concerns about the team's outsized influence.

On-Chain Data and the Path to Token Value Accrual

On-chain metrics reveal a protocol in flux. The Aavenomics update of 2024, which deprecated the LEND token and introduced a more efficient revenue redistribution system, laid the groundwork for the current framework. However, the lack of a concrete, enforceable model for token value accrual remains a sticking point. Critics argue that without clear legal structures to define asset ownership and revenue routing, the DAO risks ceding long-term value to Aave Labs.

The proposed framework's success hinges on its ability to address these gaps. By institutionalizing revenue-sharing and IP governance, Aave could create a blueprint for sustainable tokenomics. Yet the December 2025 vote demonstrated that rushed decisions-particularly those perceived as favoring insiders-risk alienating the community. As one delegate noted, "The framework's legitimacy depends on whether it's adopted through a transparent, inclusive process."

Conclusion: A Defining Moment for Aave's Governance Model

Aave's governance turmoil is more than a corporate drama-it's a case study in the challenges of balancing innovation with decentralization. The proposed revenue-sharing framework represents a critical test of whether the protocol can reconcile its need for agility with the DAO's demand for accountability. If implemented with robust safeguards and community buy-in, the framework could restore trust and position Aave as a leader in on-chain revenue alignment. However, if it's perceived as a power grab, the protocol risks further fragmentation and a prolonged erosion of token value.

For investors, the key takeaway is clear: Aave's future hinges not just on the technical merits of its upgrades, but on its ability to rebuild trust through transparent governance. The coming months will reveal whether this ambitious framework can bridge the divide-or deepen it.