Aave governance firm exits $27bn DeFi giant as protracted power struggle deepens

After weeks of back-and-forth, the Aave Chan Initiative is ending its work on the $27 billion lending protocol, Aave.

Marc Zeller, the founder of ACI, announced the move on Wednesday via a governance post.

In the post, he outlined that his firm, which conducts business development and manages governance for the wider Aave community, will wind down its operations over the next four months.

Zeller pointed to a crucial governance vote that passed on Saturday, which moved forward a proposal to grant Aave Labs, the core development firm behind the protocol, “the largest budget in DAO history.”

A decentralised autonomous organisation is a community of token holders who can vote and propose amendments to a specific DeFi protocol to enhance it.

Zeller alleged that the vote was backed almost entirely by crypto addresses linked to the Labs entity.

“There is no role for an independent service provider in an environment where the largest budget recipient holds undisclosed voting power and uses it on its own proposals,” the post reads.

ACI’s exit from the largest protocol in decentralised finance is just the latest salvo in what has been a tumultuous passage for Aave.

Aave’s bumpy ride

Last week, BGD Labs, the developer team that built and deployed a prominent iteration of the Aave codebase called V3, also exited the ecosystem.

The project’s native AAVE token plummeted 6% on February 20 after “the most productive engineering team” called it quits.

Zeller told DL News today that this event was the final straw.

“Everything was entirely preventable,” he said.

The primary contention revolves around a protracted conflict between Aave Labs and the purported agency that its DAO actually enjoys.

This could include hiring – or firing – a new auditor to revise the code or whether a protocol should launch on a new blockchain network.

In December, the community issued a proposal to transfer all of the project’s intellectual property, including social media accounts and the aave.com website, to the DAO. That proposal failed on Christmas Day.

To defuse the conflict, Labs proposed directing all revenue from Aave-branded products, including the Aave website, to the DAO.

But that proposal also included language “ratifying” Aave V4 as the “core technical foundation for future development.”

That would mean pausing work on Aave V3 and even changing its lending and borrowing parameters to compel users to migrate to V4 — a red line for BDG Labs.

The organisation viewed pausing work on a robust, lucrative version of the protocol’s codebase to move users to an unproven version as reckless.

As for what’s next, Zeller said he’s keeping an eye on what BDG Labs will do next.

“If they build a protocol, I’ll join,” he told DL News. “But now, I need time to wind down gracefully.”

Liam Kelly is DL News’ Berlin-based DeFi correspondent. Have a tip? Get in touch at liam@dlnews.com.