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Original Title: \”Second-Largest Holder Liquidates at a Loss, Can AAVE Still Be Bought Amid Deepening Tensions?\”
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Original Author: Azuma, Odaily Planet Daily
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The leading lending protocol Aave is embroiled in a public controversy, with escalating tensions between the team and the community objectively undermining confidence among token holders in the AAVE token itself.
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Early this morning, the second-largest AAVE holder (excluding the project team, protocol contracts, and CEXs) liquidated 230,000 AAVE tokens (worth approximately $38 million) at a loss, causing AAVE to drop 12% in the short term. It is reported that this \”second-largest holder\” acquired the AAVE tokens between late last year and early this year at an average price of $223.4, and today’s liquidation occurred at an average price of around $165, resulting in a final loss of $13.45 million.
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· Odaily Note: The whale address is https://debank.com/profile/0xa923b13270f8622b5d5960634200dc4302b7611e.
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Cause of the Incident: Fee Flow Dispute
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To understand the current community crisis at Aave, we need to start with a recent change to the Aave frontend.
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On December 4, Aave announced a partnership with Cow Swap, adopting the latter as the default trading route for Aave’s frontend swap functionality (Odaily Note: previously ParaSwap), leveraging its anti-MEV features to achieve better quotes.
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This appeared to be a routine functional upgrade, but the community soon discovered that while using ParaSwap, the additional fees generated by this function (including referral fees or positive slippage surplus fees) were directed to the Aave DAO treasury address, but after switching to Cow Swap, they were redirected to the Aave Labs address.
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Community representative EzR3aL was the first to uncover this undisclosed change by Aave. In the governance forum, they questioned the Aave team and estimated that, based on tracking fee flows on Ethereum and Arbitrum alone, this change could generate approximately $200,000 in weekly revenue, translating to over $10 million annually—meaning Aave had redirected at least tens of millions of dollars in revenue from the community address to the team address, largely unnoticed.
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Core Controversy: Who Truly Owns the Aave Brand?
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As EzR3aL’s post gained traction, many AAVE holders felt betrayed, especially considering that Aave made this change without community consultation or disclosure, suggesting an intent to conceal the alteration.
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In response to community concerns, Aave Labs directly replied under EzR3aL’s post, stating that there should be a clear distinction between the protocol layer and the product layer. The swap interface on the Aave frontend is entirely operated by Aave Labs, which is responsible for funding, building, and maintaining it. This functionality is completely independent of the DAO-managed protocol, so Aave Labs has the right to autonomously decide how to operate and profit from it…Previously, the revenue directed to the Aave DAO address was a donation from Aave Labs, not an obligation.
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In short, Aave Labs’ stance is that the Aave frontend interface and its ancillary functions are essentially team products, and the revenue generated should be regarded as company property, not conflated with the protocol and related revenues controlled by the DAO.
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This statement quickly sparked heated debate within the community over the ownership of the Aave protocol and its products. A well-known DeFi analyst wrote an article titled \”Who Owns ‘Aave’: Aave Labs vs Aave DAO,\” and BlockBeats also republished a Chinese translation, which interested readers can refer to for further context.
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On December 16, the conflict escalated further. Aave’s former CTO, Ernesto Boado, proposed in the governance forum to transfer control of Aave’s brand assets (including domain names, social media accounts, naming rights, etc.) to AAVE token holders. These assets would be managed through a DAO-controlled entity (with specific details to be determined later) and protected by strict anti-encroachment mechanisms.
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The proposal garnered nearly ten thousand views and hundreds of high-quality replies in the Aave governance forum, with various stakeholders in the Aave ecosystem expressing their views. Although some voices argued that the proposal’s execution plan was insufficient and risked exacerbating tensions, the majority of responses expressed support.
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Founder Responds, but Community Remains Unconvinced
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As community sentiment intensified, Aave founder Stani appeared in the forum to respond: \”…This proposal leads us in a direction unfavorable to the Aave ecosystem. It attempts to oversimplify a complex legal and operational issue into a simple ‘yes/no’ vote without providing a clear execution path. Handling such a complex issue should involve a structured process designed specifically for this purpose, with multiple interim checks and concrete solutions to reach consensus. For these reasons, I will vote against this proposal…\”
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From a business operations perspective, Stani’s claim that the proposal is too hasty may not be wrong. However, in the current atmosphere, this statement is easily interpreted as ‘the Aave founder opposes transferring brand assets to token holders,’ which further exacerbates tensions between the community and the team.
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After Stani’s statement, some aggressive comments targeting him even appeared under the original post. More users expressed dissatisfaction through forums or social media. An OG user mentioned that they considered liquidating their AAVE holdings for the first time, while a loyal AAVE believer stated: \”AAVE holders should realize that this is just another DeFi shitcoin. It’s no better or worse than the others.\”
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The latest community development, as mentioned at the beginning of this article, is the second-largest holder exiting with a loss exceeding tens of millions of dollars.
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Can AAVE Still Be Bought?
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At that time, AAVE was still favored by top institutions like Multicoin Capital, with its strong brand reputation, substantial locked funds, clear expansion path, robust revenue, and buyback flows proving that AAVE was a ‘true value token’ distinct from other altcoins.
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But in just two weeks, a public relations crisis—from fee ownership to brand control and team-community relations—has rapidly pushed AAVE from a ‘representative of value tokens’ into the center of controversy, even landing it on the short-term decline list due to emotional impact.
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As of this writing, Aave Labs has indicated under Ernesto’s proposal that they have initiated an ARFC snapshot vote on the proposal, allowing AAVE token holders to formally express their stance and clarify the future direction. The outcome of this vote and the subsequent handling by the Aave Labs team will undoubtedly significantly impact Aave’s community faith and the short-term price performance of AAVE.
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It is important to emphasize that this incident is not merely a ‘negative news event’ or ‘performance change’ but a concentrated interrogation of Aave’s existing governance structure and the boundaries of rights and interests.
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If you believe that Aave Labs will maintain a high degree of alignment with Aave DAO in long-term interests, and the current friction is more a result of communication and procedural missteps, then the price pullback driven by sentiment may present a good entry window. However, if you view this controversy as exposing not an isolated issue but a structural conflict stemming from long-standing ambiguities in rights and interests between the team and the protocol, coupled with a lack of institutional constraints, then this turmoil may only be the beginning.
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From a broader perspective, the controversy surrounding Aave is not an isolated case. As DeFi matures, protocol revenues become genuinely substantial, and brands and frontends begin to hold commercial value, some structural contradictions between protocols and products, teams and communities will inevitably surface. Aave is now under the spotlight not because it has made more mistakes, but because it has progressed further.
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