Aave, one of the decentralized finance (DeFi) industry’s largest lending protocols, has been at the center of a very public debate for months about what it should be.
At its core, much of the community wants the network to be a decentralized financial layer governed by token holders, while some warn that it is moving towards a more coordinated model shaped by key contributors.
Simply put, the debate is about whether Aave should remain a neutral, open platform that anyone can rely on, or move toward a more structured model in which key contributors play a greater role in shaping products and bringing in revenue — a shift that could impact how decentralized the protocol is and who benefits from its growth.
After a turbulent period marked by governance disputes, contributor exits and a major strategic overhaul, Stani Kulechov, the founder of the main developer company supporting the network, sees this moment not as a failure, but as a necessary evolution.
“We’ve been doing this for almost a decade,” the Aave Labs founder told CoinDesk. “Finance is a big set of infrastructure… it takes time to replace it.”
A debate that started with compensation
The final chapter started late last year with what seemed like a technical issue: interface costs.
In December 2025, discussions over whether the 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 the treasury, exposing tensions over incentives and control that had been building for years.
Those tensions escalated in February when Aave Labs introduced a proposal called “Aave Will Win.”
At its core was a simple idea: all revenue generated by Aave-branded products should ultimately flow back to the DAO. The proposal leaned towards a more coordinated approach between the protocol and the products built around it. “We are becoming token-centric… but we recognize that the value comes from the protocol layer as well as the product layer,” Kulechov said.
Aave Labs is a major contributor to the development, but has no control over the DAO, which is managed by token holders; However, its proposals and products could impact how value flows through the ecosystem, including revenues going into the DAO treasury.
Rather than resolving tensions, the proposal has exacerbated them.
In early March, the Aave Chain Initiative (ACI), one of the DAO’s most active governance groups, announced it would close after clashing with Aave Labs over the plan. The group had been responsible for the majority of board activities in recent years, making its departure particularly notable.
The dispute centered on concerns that the proposal blurred the line between independent DAO governance and the influence of key contributors. Some critics argued that the voting process raised questions about what decentralized decision-making really is like in practice.
ACI’s departure followed the earlier departure of BGD Labs, a key technical contributor behind Aave v3, citing strategic differences. Together, these steps exposed a recurring tension in decentralized systems: while protocols are managed on-chain, much of the development and coordination still relies on a relatively small group of contributors.
However, Kulechov sees the churn as part of a normal cycle.
“I don’t think there’s much change… this is very normal,” he said, pointing to similar transitions in Aave’s history.
A technical upgrade in the background
Running parallel to the governance overhaul is Aave’s next major protocol upgrade, known as v4. The upgrade has been in development for approximately two years and is now nearing launch after an extended period of security testing and governance evaluation. While unrelated to the 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 allow new use cases and integrations to be more easily built 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 within the protocol.
While v4 itself has not been the central point of discussion, its rollout comes as the DAO continues to debate how to distribute the value generated from new products and infrastructure across the ecosystem.
Its rollout comes at a time when Aave is not only refining its governance and economic model, but also upgrading the underlying system itself – paving the way for the next phase of growth.
DeFi’s next phase
The debate surrounding Aave comes at a time when the broader DeFi sector is once again under scrutiny.
After the explosive growth of previous cycles, activity has cooled and questions about the sector’s long-term relevance have resurfaced. Critics point to governance conflicts and falling interest rates as signs the model may be faltering.
Kulechov disagrees. “DeFi is stronger than ever,” he said, pointing to tens of billions in deposits still tied up across the ecosystem.
What changes, he argues, is where 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 tools.”
In that view, DeFi will not replace traditional finance overnight. Instead, it becomes part of the infrastructure – embedded in the backend of fintech platforms and financial institutions.”
The recent governance disputes and changes in Aave’s contribution highlight an ecosystem in transition.
Efforts to evolve the ecosystem have brought new coordination challenges, even as they reflect a broader shift within DeFi as protocols seek to adapt to the applications built on top of them.
“This is just part of building better financial systems,” Kulechov said.
Read more: Aave Labs Proposes ‘Aave Will Win’ Plan to Send 100% of Product Revenue to DAO