Aave Labs proposes paying DAO all revenue from Aave-branded products

In a long-awaited move, Aave Labs proposed on Thursday directing all of its revenue from Aave-branded products to Aave DAO, the digital cooperative that manages DeFi’s top eponymous lending protocol.

Labs also proposed “ratifying” a forthcoming version of the protocol, Aave v4, as the “core technical foundation for future development.”

The proposal is intended to settle a long-running dispute over control of the protocol, the largest in decentralised finance with more than $26 billion in user deposits.

It is meant to be decentralised, with control spread across members of the DAO — the hundreds of thousands of people who own the Aave token — rather than concentrated in its creator, Stani Kulechov, or the company he runs.

But influential members within the DAO chafed at Labs’ influence over the protocol. That tension boiled over in December, when it was revealed that Labs had stopped sharing revenue from the Aave website, which connects users to the protocol.

A very public spat played out in Aave’s governance forum and on social media. Some members of the DAO wanted Labs to relinquish the Aave brand, and one accused it of executing a “slow-motion coup.”

In addition to sharing certain revenue with the DAO and centering v4 as the DAO’s focus moving forward, Thursday’s proposal would have the DAO allocate $25 million to Labs for ongoing product development and authorise the creation of an affiliated foundation that would be responsible for defending Aave trademarks.

“The framework formalizes Aave Labs’ role as a long-term contributor to the Aave DAO under a token-centric model, with 100% of product revenue directed to the DAO,” Kulechov said in a statement.

“As onchain finance enters a decisive new phase, with fintechs and institutions entering DeFi, this framework positions Aave to capture major growth markets and win over the next decade.”

While members of the DAO might welcome the revenue sharing proposal, it is unclear how they might respond to its other components. Some members have resisted Labs’ push to sideline Aave v3, for example.

Marc Zeller, head of Aave Chan Initiative, a delegate within the DAO, criticised the proposal over Labs’ failure to consult with delegates.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.