AAVE fell 10% in the early hours of the Asian market on Monday after facing sell-offs worth 50 million USD as a result of increasing governance tensions
This drop occurred amid allegations that Aave Labs, the company of Stani Kulechov, transferred millions of USD in swap fees from the DAO treasury for use without approval from token holders, leading to a debate about decentralized governance and the influence of founders.
The revenue dispute sparked criticism within the community, with the price of AAVE dropping 10%.
While the governance drama of the DAO and the revenue debate unfold, the price of AAVE has decreased by more than 10% in the past 24 hours, currently trading at 159.86 USD.
This controversial issue centers around Aave's adoption of CowSwap on its platform, replacing ParaSwap, with critics claiming that this change, which occurred after Aave Labs received funding from CowSwap, diverted expected revenues of up to 10 million USD per year away from the DAO.
An open letter from Orbit representatives states that the use of ParaSwap generates approximately 200,000 USD per week for the DAO.
Members of the DeFi community see the transfer of these fees as undermining the decentralized governance approach of the DAO.
Stani Kulechov and Aave Labs assert that the revenues from the website operations are separate from the main protocol revenues and have always been voluntary.
However, there are still questions about the dual role of the CEO and control of the protocol's assets, raising concerns about potential conflicts of interest.
The DAO's Alignment proposal has been moved to Snapshot.
To address this crisis, Kulechov has brought forth a controversial proposal to redefine the DAO's guidelines into the voting phase on Snapshot.
The plan aims to transfer various key assets, such as domains and social media account names, from Aave Labs to the DAO.
People are tired of this debate, and voting is the best solution. This is true governance, Kulechov said, inviting token holders to participate in the decision-making.
Nevertheless, market confidence appears to be low, with data from Polymarket indicating only a 25% chance that this proposal will pass, down 26 points from earlier in the week.
Community members, such as Tulip King, have suggested that if the vote fails, it may lead to an even greater decline in the price of AAVE.
Impact on the market and governance.
This event reflects the broader challenges that DAOs face, which is aligning the incentives of developers, service providers, and token holders while still maintaining true decentralization.
Critics point to alternative models, such as Hyperliquid, where nearly all revenues are used for token buybacks, and the team is compensated in the native tokens, which could be a suitable approach for Aave as well.
Perhaps they should look at Hyperliquid, where 99% of revenues go towards buying back HYPE, and the team holds and receives payment in HYPE tokens. Everyone benefits, so why can't Aave Labs do the same, especially when the funds are sufficient? Or do DAOs inherently have flaws? Analyst Duo Nine raised this question.
The Snapshot vote requires a majority of 320,000 YAE votes along with at least 80,000 more votes than the next option to pass. Voting will be open for 3 days to allow token holders to consider the direction of the protocol going forward.
Meanwhile, the sell-off of AAVE highlights market concerns about transparency in governance and whether token holders can trust that revenues will return to the DAO and not personal interests.
As the community moves forward into voting, the outcome this time may be a significant milestone for Aave and the broader DeFi ecosystem.
