The Aave Chan Initiative, one of the most active governance groups within the Aave DAO, announced its closure after a dispute over transparency and voting power linked to a record-breaking budget request from Aave Labs.
Marc Zeller, founder of ACI, announced that the eight-person team will not seek renewal of its contract and will close operations over the next four months. The group plans to continue participating in governance during that period as it delivers infrastructure and opens up its tools.
The exit marks a turning point for Aave, the leading decentralized financial protocol with nearly $27 billion in total value locked across 20 blockchains.
It comes weeks after BGD Labs, the team that built and maintained Aave’s V3 codebase, said it was also stepping away due to organizational and strategic disagreements with Aave Labs.
Aave’s governance token, AAVE, is down over 11% in the last 24 hours since the ACI exit and is now trading at $110. It is down more than 44% in the last year, compared to BTC’s 24% drop in the same period.
The impact of ACI
ACI said it drove 61% of governance actions over the past three years and helped implement $101 million in incentives. During that time, Aave’s GHO stablecoin grew from $35 million to $527 million in supply, and the protocol’s DeFi market share rose above 65%, according to the group’s figures. ACI said it cost the DAO $4.6 million over three years.
The conflict centers on a proposal from Aave Labs titled “Aave Will Win.” The plan called for the DAO to approve up to approximately $51 million in stablecoins and 75,000 AAVE tokens to fund the development, marketing, and expansion of products tied to Aave V4.
He also proposed directing all revenue from Aave-branded products to the DAO. That proposal passed its first formal vote over the weekend with about 52% supporting it.
ACI said it requested four conditions before supporting the proposal, including stricter monitoring of milestones in the chain and limits on self-voting by directorates linked to the budget recipient. Those conditions were not addressed, Zeller wrote.
The organization argued that addresses linked to Aave Labs voted on the proposal, ultimately tilting the result in its favor. In a post-mortem published on the governance forum, the group said the episode demonstrated that “there is no role for an independent service provider” if the largest recipient of the budget can influence its own approval without full disclosure.
Aave Labs has not yet issued a response regarding ACI’s departure.
Relax
To settle its remaining obligations, ACI will submit a direct proposal to cancel its GHO funding stream and transfer 120 days of funding to its treasury address, with the remainder returning to the DAO.
The group said it chose a lump-sum approach because it does not trust the governance process to maintain its flow during the transition. Once the proposal is executed, ACI will also cut its own AAVE rights acquisition pipeline.
Over the next four months, ACI plans to port or open source the systems it built. These include governance panels, incentive frameworks, delegate coordination programs and their roles on committees such as the Aave Liquidity Committee and GHO Stewards. The group will leave those positions at the end of the liquidation period.
The departure raises broader questions about decentralization within large DAOs. In theory, token holders control the system, but in practice, voting power is often concentrated around founders, early investors, and grand delegates.
If a single entity has enough influence, critics say, independent oversight becomes difficult to sustain. The question of decentralization on Aave began to grow after the DAO began debating who controls the protocol’s interface and who benefits financially from it.
For Aave users, loans and borrowing will continue as normal. Smart contracts are still in effect and other service providers such as Chaos Labs, TokenLogic and Certora continue their functions.
Still, the loss of two major contributors in quick succession may change how the DAO manages risk, budgets, and future updates.
