Aave Labs leads in major vote after backtracking on plan to sideline v3

Aave DAO delegates are voting on a controversial proposal that would sideline the world’s largest DeFi protocol in favour of a newer version.

That’s frightened delegates who say it’s a risk the DAO cannot afford — the current version of Aave, v3, is a smash hit, and its would-be replacement, v4, has yet to see the light of day.

This week, the critics notched a small victory. Before voting began on Wednesday, Aave Labs, the company behind the proposal, relaxed its aggressive timeline for moving Aave users to v4.

“While we think it is important for the DAO to align strategically behind V4 as part of this proposal, the timeline is up for discussion,” Labs, the company that built the protocol, wrote in the Aave governance forum earlier this week.

“Aave V3 is a battle-tested protocol, and it will continue to operate as a core part of the ecosystem for as long as the DAO decides it should.”

Voting is set to end on Saturday. As of Friday evening, “aye” votes held a narrow lead, with 52%.

Contractor departure

With more than $26.3 billion in user deposits, Aave is the largest protocol in decentralised finance. V3 accounts for more than 97% of Aave’s deposits, according to DefiLlama data. It has generated $184 million in revenue since its launch in 2022.

Before Labs’ about-face this week, it had proposed pausing work to improve v3 and even changing its lending and borrowing parameters in order to compel users to migrate to v4.

That didn’t just anger delegates. Bored Ghosts Developing, a major Aave DAO contractor founded by a former Labs executive, said it would not seek renewal of its contract this year.

“We believe even proposing this on the main revenue-maker & fully functional engine of Aave, is borderline outrageous,” Bored Ghosts wrote.

On Monday, Labs said it would not seek to force users to move to v4 after all.

“If a V3 market serves a particular chain or ecosystem well, the DAO has the authority to keep it running indefinitely,” the company wrote. “V4 also brings new use cases and opportunities that do not exist on V3, which we expect will drive adoption on its own terms … There will be no forced migration.”

Funding request

The proposal went well beyond cementing v4’s status as the future of the Aave protocol, however.

Labs has proposed directing all of its revenue from Aave-branded products to Aave DAO. It is a concession to critics who were furious to learn in December that Labs had ended its practice of sending the DAO certain revenue from aave.com, a website the company built.

The company has also proposed creating a foundation that would own and defend Aave trademarks, as well as a service provider agreement with the DAO that would see the cooperative pay Labs $25 million for ongoing product development and another $17.5 million “payable upon specific product launches.”

The proposal garnered several prominent supporters. But it also drew scepticism from major delegates, including Marc Zeller, one of Labs’ fiercest critics in recent months.

Zeller said the requested payment was far too high, amounting to 31% of the DAO’s war chest. Among other things, he requested that Labs break up its asks into multiple votes.

“Each stands on its own merits,” he wrote. “The community can support what it agrees with and refine what it doesn’t.”

Instead, Labs advanced the proposal to an initial vote.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.