The Aave Chan Initiative, one of the most active governance groups within the Aave DAO, announced its closure after a dispute over transparency and voting power related to a record budget request from Aave Labs.
Marc Zeller, founder of ACI, announced that the eight-person team will not seek to renew its contract and will cease operations over the next four months. The group plans to continue to participate in governance during this period while selling its infrastructure and open source its tools.
This release marks a turning point for Aave, the leading decentralized finance protocol with a total value of nearly $27 billion locked across 20 blockchains.
This comes a few weeks after BGD Labs, the team that built and maintained Aave’s V3 codebase, announced that it would also be stepping down due to organizational and strategic disagreements with Aave Labs.
Aave’s governance token, AAVE, is down over 11% in the past 24 hours from ACI’s release to now trade at $110. This is a decline of over 44% over the past year, compared to a 24% decline for BTC over the same period.
The impact of the ICA
ACI said it has driven 61% of governance actions over the past three years and contributed to the deployment of $101 million in incentives. During this period, the supply of Aave’s GHO stablecoin grew from $35 million to $527 million, and the protocol’s DeFi market share exceeded 65%, according to the group’s figures. ACI said it cost the DAO $4.6 million over three years.
The conflict centers on a proposal from Aave Labs titled “Aave Will Win.” The plan called for the DAO to approve up to approximately $51 million in stablecoins and 75,000 AAVE tokens to fund the development, marketing, and expansion of products related to Aave V4.
He also proposed directing all revenue from Aave-branded products to the DAO. That proposal passed its first formal vote this weekend with about 52 percent support.
ACI said it requested four conditions before supporting the proposal, including stricter tracking of on-chain milestones and limits on automatic voting by addresses linked to the budget beneficiary. These conditions have not been resolved, Zeller wrote.
The organization argued that addresses linked to Aave Labs voted on the proposal, ultimately tipping the scales in their favor. In a post-mortem posted on the governance forum, the group said the episode showed there was “no role for an independent service provider” if the budget’s largest beneficiary can influence its own approval without full disclosure.
Aave Labs has not yet released a response to ACI’s release.
Down
To settle its remaining obligations, ACI will submit a direct proposal to cancel its GHO funding stream and transfer 120 days of funding to its treasury address, with the remainder going to the DAO.
The group said it chose a flat-rate approach because it does not trust the governance process to maintain its flow during the transition. Once the proposal is executed, ACI will also remove its own AAVE acquisition flow.
Over the next four months, ACI plans to divest or open source the systems it has built. These include governance dashboards, incentive frameworks, delegate coordination programs and its roles on committees such as the Aave Liquidity Committee and GHO Stewards. The group will vacate these positions at the end of the liquidation period.
This departure raises broader questions about decentralization within large DAOs. In theory, token holders control the system, but in practice, voting power is often concentrated around founders, early investors, and grand delegates.
If a single entity holds enough influence, critics say, independent oversight becomes difficult to maintain. The issue of decentralization in Aave began to gain momentum after the DAO began debating who controls the protocol’s interface and who benefits financially.
For Aave users, lending and borrowing will continue as normal. Smart contracts remain in force and other service providers such as Chaos Labs, TokenLogic and Certora continue to play their role.
Still, the rapid loss of two major contributors could change how the DAO manages risks, budgets, and future upgrades.
