Discovered the revenue diversion
On December 11, 2025, a pseudonymous Aave DAO delegate named EzR3aL posted an open letter in the Aave board forum asking where the swap fees went. Using on-chain analysis, EzR3aL traced the fees to a private address managed by Aave Labs instead of the DAO treasury.
The financial impact is significant. According to the analysis, the fee diversion amounts to about $200,000 per week, or about $10 million per year. This represents approximately 10% of the Aave DAO’s potential revenue, which community members claim belongs to token holders.
Previously, Aave used ParaSwap for swap functionality. That arrangement sent excess revenue to the DAO treasury without charging users explicit fees. The last weekly transfer was valued at 46 ETH, worth more than $150,000 at the time.
Source: governance.aave.com
The new CoW Swap integration, which rolled out in mid-2025 and was fully announced on December 4, 2025, charges user fees of 15-25 basis points for swaps. However, these fees now flow to Aave Labs instead of to the community fund.
Key players take sides
Marc Zeller, founder of the Aave Chan Initiative, called the situation “extremely worrying” and described it as follows “covert privatization” of approximately 10% of the DAO’s potential revenue. Zeller argued that Aave Labs was using brand assets and intellectual property paid for by the DAO.
“Aave Labs, in pursuit of its own revenue, has diverted Aave’s user volume to competition. This is unacceptable,” Zeller wrote on the board forum. He noted that Aave Chan Initiative engineers had contributed extensively to the interface maintained by Aave Labs under the assumption that monetization would benefit the DAO.
Zeller also raised broader concerns about upcoming features. He wondered whether other elements such as Aave Vaults, Horizon, and the V4 liquidation engine could also be “ring-fenced” from the DAO, potentially reducing revenues by tens of millions per year.
Aave Labs defends its position
Stani Kulechov, founder and CEO of Aave Labs, responded publicly on social media and at the board forum. He rejected the characterization of the situation as stolen revenue, arguing that previous ParaSwap fees were a “discretionary surplus” that Aave Labs voluntarily donated to the DAO.
“It was never a rate change, it was a surplus that we donated to the DAO,” Kulechov said. He drew a sharp distinction between the Aave protocol itself, which is managed by the DAO through smart contracts, and the frontend interface on Aave.com, which he described as a private product funded and maintained by Aave Labs.
Kulechov emphasized that Aave Labs bears the costs of engineering and security of the website, and that the DAO does not subsidize ongoing product development costs. He claimed that it is appropriate for Aave Labs to monetize its products, especially with features that have nothing to do with the protocol itself.
“It’s also fine for Aave Labs to make money from its products, especially since they don’t touch the protocol itself,” he said.
Aave Labs acknowledged that the change had not been effectively communicated, but defended the technical decision. The company says it switched to CoW Swap to provide better execution prices and stronger MEV (maximum extractable value) protection, and not primarily to generate revenue.
The scope of Aave’s activities
The dispute takes place against the backdrop of Aave’s enormous growth. The protocol currently has a total value of over $34 billion and generates over $100 million in revenue annually, making it the dominant player in DeFi lending with a market share of approximately 60%.
Aave operates on more than a dozen blockchains, although 86.6% of its revenue comes from the Ethereum mainnet. The protocol is preparing for the V4 upgrade, which promises architectural improvements and better capital efficiency.
Broader governance questions
This conflict reveals fundamental tensions in decentralized autonomous organizational governance. The key questions include who owns the revenue from integrations built with DAO assets, whether service providers funded by the DAO have fiduciary duties to token holders, and where the line exists between DAO-managed protocols and company-controlled products.
Community members in the governance forum described the move as an “unforced error” and accused Labs of “misalignment.” The discussion generated more than 30 responses within hours, with some participants calling for “reunification” between the two entities.
Zeller also pointed out that the CoW Swap integration resulted in two lost revenue streams for the DAO. In addition to losing ParaSwap referral revenue, the DAO also lost flash loans because CoW Swap resolvers often use Balancer’s free flash loans instead of Aave’s paid flash loans.
What happens next
The Aave Chan Initiative has promised to prepare an official response to the situation. As of December 14, 2025, no formal governance proposal has been submitted to address fee routing, and the dispute remains unresolved.
The situation could lead to proposals to return the fees to the DAO treasury or to establish clearer policies for future integrations. Token holders can ultimately vote on how to handle revenue from frontend functions versus core protocol functionality.
For now, the Aave community continues to debate the proper relationship between a decentralized protocol and the centralized development company building the primary interface. The outcome could set important precedents for how other DeFi protocols address similar governance challenges.
The path forward
This dispute serves as a critical test case for DeFi governance. As protocols mature and generate substantial revenue, questions about who controls that revenue and how decisions are made will only become more important. The Aave community must now decide whether service providers can unilaterally monetize features built on DAO-funded infrastructure, or whether such decisions require explicit community approval.
The resolution of this conflict will likely impact not only the future of Aave, but also how other major DeFi protocols structure the relationships between their DAOs and development companies.
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