For months, Aave, one of the largest lending protocols in decentralized finance (DeFi), has been at the center of a very public debate over what it is supposed to be.
At heart, much of the community wants the network to be a decentralized financial layer governed by token holders, while a fraction warns that it is moving toward a more coordinated model shaped by major contributors.
Simply put, the debate is over whether Aave should remain a neutral, open platform that anyone can rely on, or move towards a more structured model in which key contributors play a larger role in building products and capturing revenue – a shift that could impact the protocol’s decentralization and who benefits from its growth.
After a turbulent period marked by governance conflicts, contributor departures and a radical strategic overhaul, the founder of the main development company supporting the network, Stani Kulechov, sees the moment not as a rupture, but as a necessary evolution.
“We’ve been doing this for almost a decade,” the Aave Labs founder told CoinDesk. “Finance is a large set of infrastructure…replacing it takes time. »
A debate that started with prices
The latest chapter began late last year with what appeared to be a technical issue: interface fees.
In December 2025, discussions over whether revenue generated by Aave’s front-end interfaces should flow back to the DAO – the decentralized autonomous organization that oversees Aave’s governance and treasury – revealed deeper disagreements over value capture. The DAO opposed proposals that would divert fees from its treasury, highlighting tensions over incentives and control that had been building for years.
These tensions intensified in February when Aave Labs presented a proposal called “Aave Will Win.”
At its core was a simple idea: all revenue generated from Aave-branded products should ultimately flow back to the DAO. The proposal tended towards a more coordinated approach between the protocol and the products built around it. “We are becoming token-centric… but we recognize that value comes from both the protocol layer and the product layer,” Kulechov said.
Aave Labs is a key contributor to development but does not control the DAO, which is governed by token holders; however, its propositions and products can influence how value flows through the ecosystem, including revenue directed to the DAO treasury.
Rather than resolving tensions, the proposal intensified them.
In early March, the Aave Chain Initiative (ACI), one of the DAO’s most active governance groups, announced its closure after a conflict with Aave Labs over the plan. The group had led the majority of governance activities in recent years, making his departure particularly notable.
The dispute centered on concerns that the proposal would blur the line between independent governance of the DAO and the influence of major contributors. Some critics have argued that the voting process raises questions about whether decentralization of decision-making is real in practice.
ACI’s exit follows the earlier departure of BGD Labs, a key engineering contributor behind Aave v3, which cited strategic disagreements. Together, these measures have highlighted a recurring tension in decentralized systems: even though protocols are governed on-chain, much of the development and coordination still depends on a relatively small group of contributors.
Kulechov, however, views churn as part of a normal cycle.
“I don’t think it changes much…it’s completely normal,” he said, pointing to similar transitions throughout Aave’s history.
A technical upgrade in the background
Alongside the governance overhaul is Aave’s next major protocol upgrade, known as v4. The upgrade has been in development for about two years and is now about to launch after a lengthy period of security testing and governance review. While distinct from recent governance disputes, it represents one of the most significant technical changes to the protocol to date.
At a high level, v4 is expected to introduce a more modular architecture that will make it easier to build new use cases and integrations on top of Aave’s core infrastructure. The design also aims to improve capital efficiency and expand the types of assets that can be used under the protocol.
Although v4 itself has not been the focal point of the dispute, its rollout comes as the DAO continues to debate how the value generated by new products and infrastructure should be distributed across the ecosystem.
Its deployment comes at a time when Aave is not only refining its governance and business model, but also improving the underlying system itself, paving the way for its next phase of growth.
The next phase of DeFi
The debate around Aave comes as the DeFi sector as a whole faces renewed scrutiny.
After the explosive growth of previous cycles, activity has slowed and questions about the sector’s long-term relevance have resurfaced. Critics point to governance conflicts and falling returns as signs the model may be failing.
Kuleshov disagrees. “DeFi is stronger than ever,” he said, pointing to tens of billions of deposits still stuck in the ecosystem.
What changes, he says, is where the growth will come from. Rather than purely crypto-native use cases, the next phase of DeFi will likely be driven by real-world financial activity – from institutional lending to tokenized assets.
“Every bank has a digital assets team,” he said. “Once you tokenize assets, you need utilities.”
In this vision, DeFi does not replace traditional finance overnight. Instead, it becomes part of its infrastructure – integrated into the backend of fintech platforms and financial institutions.
Aave’s recent governance conflicts and contributor changes highlight an ecosystem in transition.
Efforts to evolve the ecosystem have introduced new coordination challenges, although they reflect a broader shift within DeFi where protocols attempt to align with the applications built on them.
“It’s just part of building better financial systems,” Kulechov said.
Read more: Aave Labs offers ‘Aave Will Win’ plan to send 100% of product revenue to DAO
