Firestorm Ignites in Aave DAO Over Controversial CoW Swap Fees

By: crypto insight|2025/12/15 10:00:09

Key Takeaways

The Aave decentralized autonomous organization (DAO) and Aave Labs are amid a dispute regarding the unintended rerouting of fees from the CoW Swap integration.
The conflict centers on whether the fees generated should benefit the DAO or Aave Labs.
Aave Labs argues that it had the right to manage the front-end components involved, sparking controversy with DAO members who disagree.
This incident spotlights the complexities and challenges of DAO governance structures in decentralized finance (DeFi).

WEEX Crypto News, 2025-12-15 09:41:46

Introduction

In the ever-evolving world of decentralized finance (DeFi), tensions have risen dramatically between two central players in the Aave ecosystem—a deeply influential DeFi protocol. A conflict has sparked between the Aave decentralized autonomous organization (DAO) and Aave Labs over how fees from a newly unveiled integration with CoW Swap, a decentralized exchange aggregator, are being channeled. At the heart of this dispute is the disagreement over financial distributions and the mechanisms governing them, which are critical to the DAO’s functioning.

Unveiling the Conflict: CoW Swap Integration Fees

The conflict emerged when pseudonymous DAO contributor, EzR3aL, uncovered discrepancies related to the allocation of fees that were supposed to flow back to the Aave DAO’s treasury. Instead of being directed to the DAO, these fees were found to have been redirected to a private onchain address managed by Aave Labs. This revelation didn’t sit well with the community, as it raised immediate questions about transparency, fairness, and the respectful treatment of the decentralized collective’s interests.

EzR3aL publicly questioned the process by which the fees were rerouted, underscoring a need for accountability and adherence to community-focused governance. According to EzR3aL, this rerouting deprived the Aave DAO of roughly $200,000 per week in Ether, translating to a potential annual loss of up to $10 million. Such a substantial financial impact unquestionably merited intense scrutiny and debate within the community.

Aave Labs’ Justification

In response to these accusations, Aave Labs asserted its claim to the fees based on its development of the technical infrastructure necessary for CoW Swap’s integration. The organization argued that the website’s front-end components have always been under its jurisdiction. Moreover, they reportedly funded the creation of the “adapters”—critical lines of code that empower swap functionalities and other integrations.

Despite these assertions, Aave Labs’ explanations did little to assuage the frustrated members of the Aave DAO. Many within the DAO recalled funding the development of preceding adapter technology, further muddling the narrative of rightful ownership and revenue entitlement. This clash points to inherent tensions and complexities in decentralized governance, with each party invoking its contributions to assert dominance over financial resources.

Governance Dilemmas: DAO vs. Traditional Structures

This scenario is more than just a financial dispute. It illuminates the complicated dynamics within decentralized governance frameworks, contrasting sharply with more conventional business models. In DAOs, governance is not top-down but rather operates on collective decision-making processes with an emphasis on community input and consensus.

However, the Aave-CoW Swap dispute highlights the ambiguities and challenges that can arise when operational and financial lines blur between a DAO and associated entities like Aave Labs. The inability to strike a balance in this decentralized yet interconnected system reveals the vulnerabilities intrinsic to innovative crypto-governance structures.

Implications and Community Reactions

Reactions within the Aave community were swift and multifaceted. Marc Zeller, the founder of the Aave-Chan Initiative, represented a significant portion of the community when he expressed his concerns, labeling the decision to reroute fees to Aave Labs as “extremely concerning.” He criticized Aave Labs for steering user traffic away from the DAO’s beneficial direction, thereby strengthening outside competition at the DAO’s expense.

This move, viewed through the prism of DeFi’s ideals of transparency and shared growth, challenges the perception of equitable monetization efforts. It underscores the need for clear demarcations of power and financial accountability within DAOs. Many community members have clamored for greater clarity and communicative engagement from Aave Labs to ward off similar controversies in the future.

Navigating the DeFi Landscape’s Intricacies

The saga between Aave DAO and Aave Labs serves as a microcosm for broader challenges facing DAOs across the DeFi ecosystem. As this financial arena matures, balancing the imperative of innovation with the principles of decentralization remains a difficult task. This conflict underscores the critical need for robust frameworks that integrate fair governance practices with resource distribution.

Given the rapid pace of technological advancement and integration in DeFi, stakeholders within DAOs must navigate a constantly shifting environment characterized by both unprecedented opportunities and significant challenges. Innovations like CoW Swap introduce transformative possibilities, but they also demand equally advanced governance frameworks that can uphold the values of transparency, accountability, and shared prosperity.

Conclusion

In a world where DAOs represent a paradigm shift from traditional governance models, the conflict between Aave DAO and Aave Labs underscores the importance of open, continued dialogue and the establishment of clear operational and financial tenets. As decentralized finance continues to expand its influence, ensuring that all players—development labs, DAO members, and wider DeFi participants—understand their roles and responsibilities will be vital for achieving sustainable success.

By addressing inherent inconsistencies in funding, revenue generation, and fee allocation, DAOs can better embody the principles on which they were founded. For Aave and similar protocols, striking a balanced operational strategy that respects community governance while facilitating necessary developments remains crucial to overcoming challenges and aligning goals for the future.

FAQ

What prompted the dispute between Aave DAO and Aave Labs?

The conflict arose from concerns about the misallocation of fees generated by the integration with CoW Swap, with fees being redirected to a private address controlled by Aave Labs instead of the Aave DAO’s treasury.

Why is the fee allocation issue significant for the Aave community?

The fees represent a substantial revenue stream that could reach up to $10 million annually, which stakeholders believe should benefit the DAO and its members, rather than being controlled by Aave Labs.

How did Aave Labs justify its right to the fees?

Aave Labs claimed control over the integration’s front-end components and stated that they funded the development of key code elements, thus justifying their entitlement to the fees in their view.

Why does this conflict matter in the context of decentralized governance?

It highlights the difficulty in aligning financial interests and operational authority within a decentralized structure, emphasizing the need for robust governance frameworks.

What are some potential solutions to avoid similar conflicts in the future?

Through enhancing transparency, creating clear operational guidelines, and fostering proactive community engagement, DAOs can better navigate the challenges inherent to decentralized governance.

Over the past 24 hours, the crypto market has shown strong momentum across multiple dimensions. The mainstream discussion has focused on Coinbase's official entry into the prediction market through the acquisition of The Clearing Company, as well as the intense controversy within the AAVE community regarding token incentives and governance rights.

In terms of ecosystem development, Solana has introduced the innovative Kora fee layer aimed at reducing user transaction costs; meanwhile, the Perp DEX competition has intensified, with the showdown between Hyperliquid and Lighter sparking widespread community discussion on the future of decentralized derivatives.

I. Mainstream Topics

1. Coinbase Acquires The Clearing Company, Officially Entering Prediction Market

This week, Coinbase announced the acquisition of The Clearing Company, marking another significant move to deepen its presence in this field after last week's announcement of launching a prediction market on its platform.

The Clearing Company's founder, Toni Gemayel, and the team will join Coinbase to jointly drive the development of the prediction market business.

Coinbase's Product Lead, Shan Aggarwal, stated that the growth of the prediction market is still in its early stages and predicts that 2026 will be the breakout year for this field.

The community has reacted positively to this, generally believing that Coinbase's entry will bring significant traffic and compliance advantages to the prediction market. However, this has also sparked discussions about the industry's competitive landscape.

Jai Bhavnani, Founder of Rivalry, commented that for startups, if their product model proves to be successful, industry giants like Coinbase have ample reason to replicate it.

This serves as a reminder to all entrepreneurs in the crypto space that they must build significant moats to withstand competition pressure from these giants.

2. Kalshi Launches Kalshi Research and Integrates BSC Network

Regulated prediction market platform Kalshi launched its research arm, Kalshi Research, this week, aimed at opening its internal data to the academic community and researchers to facilitate exploration of prediction market-related topics.

Its inaugural research report highlights Kalshi's outperformance in predicting inflation compared to Wall Street's traditional models. Kalshi co-founder Luana Lopes Lara commented that the power of prediction markets lies in the valuable data they generate, and it is now time to better utilize this data.

Meanwhile, Kalshi announced its support for the BNB Chain (BSC), allowing users to deposit and withdraw BNB and USDT via the BSC network.

This move is seen as a significant step for Kalshi to open its platform to a broader crypto user base, aiming to unlock access to the world's largest prediction market. Furthermore, Kalshi also revealed plans to host the first Prediction Market Summit in 2026 to further drive industry engagement and development.

3. AAVE Token Incentive Controversy Persists as Founders and Whales Increase Holdings Against the Market Trend

The AAVE community recently engaged in heated debates around an Aave Improvement Proposal (AIP) titled "AAVE Tokenomics Alignment Phase One - Ownership Governance," aiming to transfer ownership and control of the Aave brand from Aave Labs to Aave DAO.

Aave founder Stani Kulechov publicly stated his intention to vote against the proposal, believing it oversimplifies the complex legal and operational structure, potentially slowing down the development process of core products like Aave V4.

The community's reaction was polarized. Some criticized Stani for adopting a "double standard" in governance and questioned whether his team had siphoned off protocol revenue, while others supported his cautious stance, arguing that significant governance changes require more thorough discussion.

This controversy highlights the tension between the ideal of DAO governance in DeFi projects and the actual power held by core development teams.

Despite governance disputes putting pressure on the AAVE token price, on-chain data shows that Stani Kulechov himself has purchased millions of dollars' worth of AAVE in the past few hours.

Simultaneously, a whale address, 0xDDC4, which had been quiet for 6 months, once again spent 500 ETH (approximately $1.53 million) to purchase 9,629 AAVE tokens. Data indicates that this whale has accumulated nearly 40,000 AAVE over the past year but is currently in an unrealized loss position.

The founder and whale's increased holdings during market volatility were interpreted by some investors as a confidence signal in AAVE's long-term value.

4. Top Articles: DeFi Curators and Ethereum Annual Summary

In this week's top article, Morpho Labs' "Curator Explained" detailed the role of "curators" in DeFi.

The article likened curators to asset managers in traditional finance, who design, deploy, and manage on-chain vaults, providing users with a one-click diversified investment portfolio.

Unlike traditional fund managers, DeFi curators execute strategies automatically through non-custodial smart contracts, allowing users to maintain full control of their assets. The article offered a new perspective on the specialization and risk management in the DeFi space.

Another widely circulated article, "Ethereum 2025: From Experiment to Global Infrastructure," provided a comprehensive summary of Ethereum's development over the past year. The article noted that 2025 is a crucial year for Ethereum's transition from an experimental project to global financial infrastructure. Through the Pectra and Fusaka hard forks, Ethereum achieved significant reductions in account abstraction and transaction costs.

Furthermore, the SEC's clarification of Ethereum's "non-securities" nature and the launch of tokenized funds on the Ethereum mainnet by traditional financial giants like JPMorgan marked Ethereum's gaining recognition from mainstream institutions. The article suggested that whether it is the continued growth of DeFi, the thriving L2 ecosystem, or the integration with the AI field, Ethereum's vision as the "world computer" is gradually becoming a reality.

II. Mainstream Ecosystem Updates

1. Solana: Launches Kora Fee Layer and propAMM Data Research

The Solana Foundation engineering team released a fee layer solution called Kora this week.

Kora is a fee relayer and signatory node designed to provide the Solana ecosystem with a more flexible transaction fee payment method. Through Kora, users will be able to achieve gas-free transactions or choose to pay network fees using any stablecoin or SPL token. This innovation is seen as an important step in lowering the barrier of entry for new users and improving Solana network's availability.

Additionally, a deep research report on propAMM (proactive market maker) sparked community interest. The report's data analysis of propAMMs on Solana like HumidiFi indicated that Solana has achieved, or even surpassed, the level of transaction execution quality in traditional finance (TradFi) markets.

For example, on the SOL-USDC trading pair, HumidiFi is able to provide a highly competitive spread for large trades (0.4-1.6 bps), which is already better than the trading slippage of some mid-cap stocks in traditional markets.

Research suggests that propAMM is making the vision of the "Internet Capital Market" a reality, with Solana emerging as the prime venue for all of this to happen.

2. Perp DEX: Hyperliquid vs. Lighter Competition Intensifies

The competition in the perpetual contract DEX (Perp DEX) space is becoming increasingly heated.

In its latest official article, Hyperliquid has positioned its emerging competitor, Lighter, alongside centralized exchanges like Binance, referring to it as a platform utilizing a centralized sequencer. Hyperliquid emphasizes its transparency advantage of being "fully on-chain, operated by a validator network, and with no hidden state."

The community widely interprets this as Hyperliquid declaring "war" on Lighter. The technical differences between the two platforms have also become a focal point of discussion: Hyperliquid focuses on ultimate on-chain transparency, while Lighter emphasizes achieving "verifiable execution" through zero-knowledge proofs to provide users with a Central Limit Order Book (CLOB)-like trading experience.

This battle over the future direction of decentralized derivatives exchanges is expected to peak in 2026.

Meanwhile, discussions about Lighter's trading fees have surfaced. Some users have pointed out that Lighter charged as much as 81 basis points (0.81%) for a $2 million USD/JPY forex trade, far exceeding the near-zero spreads of traditional forex brokers.

Some argue that Lighter does not follow a B-book model that bets against market makers, instead anchoring its prices to the TradFi market, and the high fees may be related to the current liquidity or market maker balance incentives. Providing a more competitive spread for real-world assets (RWA) in the highly volatile crypto market is a key issue Lighter will need to address in the future.

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