The Aave Chan Initiative, one of the most active governance groups within the Aave DAO, announced its closure following a transparency and voting rights dispute related to a record budget request from Aave Labs.
Marc Zeller, founder of ACI, announced that the eight-member team will not seek an extension of its contract and will wind down operations over the next four months. The group plans to continue participating in governance during that period, while the infrastructure is transferred and the tools are open sourced.
The exit marks a turning point for Aave, the leading decentralized finance protocol with a total value of nearly $27 billion across 20 blockchains.
It comes weeks after BGD Labs, the team that built and maintains Aave’s V3 codebase, said it would also be quitting due to organizational and strategic differences with Aave Labs.
Aave’s governance token, $AAVEhas fallen more than 11% in the last 24 hours from ACI’s exit and is now trading at $110. Over the past year, it has fallen by more than 44%, compared to BTC’s 24% decline over the same period.
The impact of ACI
ACI said it has driven 61% of board actions over the past three years and helped deploy $101 million in incentives. During that time, Aave’s $GHO stablecoin grew from $35 million to $527 million in supply, and the protocol’s DeFi market share rose above 65%, according to the group’s figures. ACI said it cost the DAO $4.6 million over three years.
The conflict revolves around a proposal from Aave Labs titled ‘Aave Will Win’. The plan called for the DAO to approve up to about $51 million in stablecoins and 75,000 $AAVE tokens to fund product development, marketing and expansion linked to Aave V4.
It also proposed sending all revenue from Aave-branded products to the DAO. That proposal went through its first formal vote this weekend, with about 52% supporting it.
ACI said it asked for four conditions before backing the proposal, including stricter onchain milestone tracking and limits on self-voting by addresses linked to the budget recipient. Those conditions remained untouched, Zeller wrote.
The organization argued that addresses linked to Aave Labs voted on the proposal, ultimately turning the outcome in their favor. In a post-mortem published on the governance forum, the group said the episode showed that there is “no role for an independent service provider” if the biggest recipient of the budget can influence its own approval without full disclosure.
Aave Labs has not yet commented on ACI’s departure.
Taper off
To meet its remaining obligations, ACI will submit an immediate termination notice $GHO funding flow and transfers 120 days of funding to the Treasury address, while the remainder returns to the DAO.
The group said it chose a lump sum approach because it does not trust the governance process to maintain flow during the transition. After the proposal is implemented, ACI will also scrap its own proposal $AAVE fortress stream.
Over the next four months, ACI plans to transfer or open source the systems it has built. These include governance dashboards, incentive frameworks, delegation coordination programs and its role in committees such as the Aave Liquidity Committee and $GHO Stewards. The group will resign these posts at the end of the phase-out period.
The 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 major delegates.
If a single entity has enough influence, critics say, independent oversight becomes difficult to maintain. The decentralization demand at Aave started to grow after the DAO started debating who controls the protocol’s interface and who benefits financially from it.
For Aave users, lending and borrowing continues as usual. Smart contracts remain live and other service providers such as Chaos Labs, TokenLogic and Certora continue their roles.
Still, the loss of two key contributors in quick succession could change how the DAO manages risk, budgets and future upgrades.