The dispute between Aave Labs and the Aave DAO appears to be escalating, with DAO delegates increasing their hostility after Labs’ “Aave Will Win” proposal sought an additional $51 million in development funding from the DAO.
On February 20, Representative BGD Labs announced its intention to discontinue its work with the DAO due to Labs’ focus on Aave V4 instead of “a very mature and successful V3.” The decision came after Stani Kulechov, co-founder of Aave Labs, stated in the proposal that “once V4 matures, V3 parameters should be gradually adjusted to encourage migration, following the same approach used in previous version transitions.”
Marc Zeller, the founder of Aave-Chan Initiative (ACI), another service provider of the Aave DAO, called BGD’s impending departure from the DAO a major change and sold part of his $AAVE possessions.
Today, the feud between the DAO and Labs was further fueled after Zeller published a full audit of Labs’ performance on Aave’s governance forum, slamming Aave Labs’ product delivery, profitability and business development (BD).
Zeller was referring to Labs’ standalone products, including Lens Protocol, $GHO v1 and Horizon, as ‘The Product Graveyard’, citing ‘zero successes’. He further pointed out that even its more successful launches, such as Horizon, which has raised over $500 million in total value (TVL), still resulted in a negative return on investment (ROI) of 96%, and that Aave’s stablecoin, $GHO v1, disconnected and had to be rebuilt by BGD and TokenLogic.
Source: Aave Governance
The report went on to criticize Aave Labs’ BD arm, noting that Labs would partner with prominent entities in DeFi and traditional finance such as Coinbase’s Layer 2 Base, World Liberty Financial, Apollo, and Mantle.
Morpho emerged as the most notable competitor in these relationships and now serves as the backend of Coinbase’s decentralized lending product, recently announcing an $800 billion partnership with asset manager Apollo Global Management.
While the relationship between the DAO and Labs continues to falter, Aave remains the leading protocol of DeFi by TVL, accounting for over 28% of the DeFi market with $27.5 billion across all chains.
Meanwhile, Morpho is the second largest credit protocol and the sixth largest in DeFi with $5.8 billion.
Despite Aave’s leading position in TVL and brand recognition, it is its native language $AAVE token is trading near a multi-year low of just $122, or a fully diluted valuation of $1.9 billion, after reaching highs of $380 in December 2024 and $660 in 2021.
$AAVE Chart – CoinGecko
Aave Labs did not respond to The Defiant’s request for comment.