‘Over $10m lost annually’ – Why Aave Labs is under fire

The Aave community is embroiled in an ownership crisis. Both the DAO (Decentralized Autonomous Organization) and the protocol’s service providers are fighting for revenue.  

At the centre of the crisis is Aave Labs, the service provider or one of the contractors that builds part of the DeFi lending protocol’s features. 

Who owns Aave’s fees?

According to multiple governance participants, contractors, including the Labs, were paid directly by the Aave [AAVE] DAO.

As a result, the user interfaces, brand, and other features and associated fees and revenues are “fully owned” by the DAO because it paid for them. 

However, a recent CowSwap integration changed that perception.

Under the new setup, swap fees no longer flowed to the DAO treasury, triggering backlash from delegates.

One of the token delegates estimated the DAO’s annual revenue loss to be at least $10 million. 

“A loss to the DAO over 365 days seen by at least over $10m, assuming a transfer of only $200k each week.”

Critics argued that the ParaSwap, which was replaced by CowSwap, shared revenue with the DAO. However, the current arrangement sidelined the DAO for the private service provider. 

Delegates raise the alarm

Earlier this year, Aave Labs proposed a tokenization product, Horizon, alongside a token, but it was shot down by the DAO. 

For Marc Zeller, Founder of a token delegate and DAO service provider, Aave-Chan Initiative, Aave Labs’ “privatization” of protocol revenue was a “concerning” and “clear attack” on tokenholders. 

Another VC partner, Louis, echoed a similar stance and added, 

“The biggest threat to any token and DAO is a competing, independent equity vehicle. AAVE tokenholders should push back much more aggressively against this long-term risk.”

Aave Labs defends itself

The Aave token buyback is currently being undertaken by the DAO and is one of the mechanisms by which value accrues to tokenholders. 

However, Stani Kulechov, the Founder of Aave stated that, 

“Aave Labs has been contributing to the protocol and its benefit for over 8 years…It is responsible for innovation with Aave V4 and similar other protocol iterations and GHO, all those primitives that we built accrue revenue to the Aave DAO.”

On-chain data from Blockworks Research showed Aave recorded more than $15 billion in net deposit flows during Q3 2025.

That said, the alcoin’s price didn’t get caught up in the debate, as it remained range-bound around $200 for the past week. 

Final Thoughts

• Aave protocol ownership remains contested between contractors and the DAO.
• Critics claimed that Aave Labs, a contractor, is undermining the DAO and tokenholders.