For months, Aave, one of the largest lending protocols in decentralized finance (DeFi), has been at the center of a very public debate about what it is supposed to be.
In essence, much of the community wants the network to be a decentralized financial layer governed by token holders, while a fraction warn that it is evolving toward a more coordinated model shaped by major contributors.
In simple terms, the debate revolves around whether Aave should remain a neutral and open platform that anyone can build on, or move towards a more structured model where key contributors play a larger role in shaping products and capturing revenue, a change that could affect how decentralized the protocol is and who benefits from its growth.
After a turbulent period marked by governance disputes, contributor departures and a broad strategic review, the founder of the main development company behind the network, Stani Kulechov, frames the moment not as a collapse, but as a necessary evolution.
“We’ve been doing this for almost a decade,” the Aave Labs founder told CoinDesk. “Finance is a big set of infrastructure… it takes time to replace.”
A debate that started with rates
The latest chapter began late last year with what seemed like a technical problem: interface fees.
In December 2025, discussions over whether revenue generated by Aave’s front-end interfaces should return to the DAO (the decentralized autonomous organization that oversees Aave’s governance and treasury) exposed deeper disagreements over value capture. The DAO rejected proposals that would divert fees from its treasury, bringing to light tensions over incentives and control that had been building for years.
Those tensions escalated in February when Aave Labs unveiled a proposal called “Aave Will Win.”
At its core, there was a simple idea: all revenue generated by Aave-branded products should ultimately return to the DAO. The proposal leaned towards a more coordinated approach between the protocol and the products created around it. “We are focusing on tokens… but we recognize that the value comes from both the protocol layer and the product layer,” Kulechov said.
Aave Labs is a key development contributor but does not control the DAO, which is governed by token holders; however, their propositions and products can influence how value flows through the ecosystem, including revenue directed to the DAO treasury.
Instead of resolving tensions, the proposal intensified them.
In early March, Aave Chain Initiative (ACI), one of the most active DAO governance groups, announced it was shutting down after clashing with Aave Labs over the plan. The group had driven most of the governance activity over the past few years, making its departure particularly notable.
The dispute centered on concerns that the proposal would blur the line between the DAO’s independent governance and the influence of major contributors. Some critics argued that the voting process raised questions about how decentralized decision-making really is in practice.
ACI’s departure followed the earlier departure of BGD Labs, a key engineering collaborator behind Aave v3, which cited strategic disagreements. Taken together, the measures highlighted a recurring tension in decentralized systems: While protocols are governed on-chain, much of the development and coordination still depends on a relatively small group of contributors.
Kulechov, however, sees defection as part of a normal cycle.
“I don’t think it will change much… this is very normal,” he said, noting similar transitions throughout Aave’s history.
A technical update in the background
Running parallel to the governance overhaul is Aave’s next major protocol update, known as v4. The update has been in development for about two years and is now about to be released after an extended period of security testing and governance review. While separate from recent governance disputes, it represents one of the protocol’s most significant technical changes to date.
At a high level, v4 is expected to introduce a more modular architecture that allows new use cases and integrations to be more easily built on top of the core Aave infrastructure. The design also aims to improve capital efficiency and expand the types of assets that can be used within the protocol.
While v4 itself has not been the central point of contention, its release comes as the DAO continues to debate how the value generated from new products and infrastructure should be distributed across the ecosystem.
Its launch comes at a time when Aave is not only refining its governance and economic model, but also updating the underlying system itself, setting the stage for its next phase of growth.
The next phase of DeFi
The debate around Aave comes as the broader DeFi sector faces new scrutiny.
After the explosive growth of previous cycles, activity has cooled and questions have resurfaced about the long-term relevance of the sector. Critics point to governance disputes and falling returns as signs that the model may be failing.
Kulechev disagrees. “DeFi is stronger than ever,” he said, pointing to tens of billions in deposits still locked across the ecosystem.
What is changing, he maintains, is where the growth will come from. Instead of purely crypto-native use cases, the next phase of DeFi is likely to be driven by real-world financial activity, from institutional lending to tokenized assets.
“Every bank has a digital asset team,” he said. “Once you tokenize assets, you need public services.”
According to that vision, DeFi does not replace traditional finance overnight. Instead, it becomes part of their infrastructure, integrated into the backend of fintech platforms and financial institutions.”
Aave’s recent governance disputes and contributor changes highlight an ecosystem in transition.
Efforts to evolve the ecosystem have introduced new coordination challenges, even as they reflect a broader shift in DeFi where protocols attempt to align with applications built on top of them.
“This is just part of building better financial systems,” Kulechov said.
Read more: Aave Labs proposes ‘Aave Will Win’ plan to send 100% of product revenue to DAO
