The Aave Chan Initiative, one of the most active governance organizations within the Aave DAO, announced its closure following a transparency and voting rights controversy related to Aave Labs’ record budget request.
ACI founder Marc Zeller announced that the eight-person team will not seek renewal and will wind down operations over the next four months. The organization plans to continue participating in governance during this period, while handing over infrastructure and open sourcing its tools.
The exit marks a turning point for Aave, the leading decentralized finance protocol with nearly $27 billion in total value locked across 20 blockchains.
A few weeks ago, BGD Labs, which builds and maintains the Aave V3 codebase, said it was also exiting due to organizational and strategic differences with Aave Labs.
Aave’s governance token, AAVE, has fallen more than 11% in the past 24 hours due to ACI’s exit and is currently trading at $110. Bitcoin fell by more than 44% last year, while BTC fell by 24% during the same period.
Impact of ACI
ACI said it has driven 61% of governance actions over the past three years and helped deploy $101 million in incentives. During this period, Aave’s GHO stablecoin supply grew from $35 million to $527 million, and the protocol’s DeFi market share rose to over 65%, according to the organization. ACI said the DAO spent $4.6 million over three years.
The focus of the conflict is a proposal from Aave Labs called “Aave Will Win.” The plan calls for the DAO to approve up to approximately $51 million in stablecoins and 75,000 AAVE tokens to fund product development, marketing and expansion related to Aave V4.
It also proposed that all revenue from Aave-branded products be attributed to the DAO. The proposal passed its first formal vote over the weekend, with around 52% in favor.
ACI said it would require four conditions to be met before supporting the proposal, including stricter on-chain milestone tracking and restrictions on self-voting for addresses associated with budget recipients. Zeller wrote that these situations were not addressed.
The group argued that addresses associated with Aave Labs voted on the proposal, ultimately swinging the outcome in their favor. In a post-mortem posted on a governance forum, the group said the incident showed “there is no role for independent service providers” if the largest budget recipients are able to influence their own approvals without full disclosure.
Aave Labs has not yet responded to ACI’s withdrawal.
Relax
To address its remaining obligations, ACI will submit a direct proposal to cancel its GHO funding stream and transfer 120 days of funds to its financial address, with the remaining funds returned to the DAO.
The group said it chose the one-time payment option because it was not confident governance processes would be able to sustain its processes during the transition period. After the proposal is implemented, ACI will also reduce its own AAVE attribution stream.
Over the next four months, ACI plans to hand over or open source the system it has built. These include the governance dashboard, incentive framework, representative coordination plan and their roles on committees such as the Aave Liquidity Committee and GHO Administrators. The group will resign from these positions at the end of the transition period.
This departure raises broader questions about decentralization within large DAOs. In theory, token holders control the system, but in practice voting power is often concentrated around founders, early investors, and large representatives.
Critics say independent oversight is difficult to maintain if a single entity has enough influence. Aave’s decentralization issues started to become more serious after the DAO began arguing over who controlled the protocol’s interface and who benefited financially from it.
For Aave users, lending and borrowing will continue as usual. Smart contracts remain in effect, and other service providers such as Chaos Labs, TokenLogic, and Certora continue to play a role.
Still, the loss of two major contributors in quick succession could change the way the DAO manages risk, budget, and future upgrades.
