Is Aave Labs’ proposal ‘extractive’? DAO debate heats up

Since December, the DeFi sector’s largest protocol has been wrestling with an existential question, pitting Aave Labs against the DAO: who owns Aave?

What began as a discussion over swap fees rapidly escalated into an existential debate about ownership of the Aave brand, as well as the rights to monetize it.

Yesterday, Aave Labs published a “temperature check” entitled “Aave Will Win Framework” on the Aave governance forum.

Their headline is “100% of product revenue to the Aave DAO,” but the post, which runs to almost 4,000 words, doesn’t end there.

Read more: Aave brand dispute rumbles on as founder buys £22M London property

At a high level, the post proposes that all of Aave product revenue will be directed to the DAO. A foundation would also be set up to “assume responsibility for holding and stewarding” the Aave brand.

This addresses the DAO’s concerns around Labs’ potential brand capture on products including the front end, Aave’s app, card and institution-focused Horizon market.

These concessions are accompanied by a funding request for considerable sums, namely $25 million in stablecoins and 75,000 $AAVE.

Further grants totaling $17.5 would be “payable upon specific product launches.”

The initial payment of stablecoins would be partially ($5 million) upfront, with the remainder streamed over the following year. $AAVE tokens would unlock linearly over two years.

It clarifies “all funds will be spent on Aave-related efforts” such as “user acquisition, marketing, and ongoing development.”

Correct destination, but the route ‘needs work’

While DAO advocates generally see the proposal as directionally positive, concerns remain over the calculation of revenue. That, and the vast sum of tokens requested, both stables and $AAVE.

Vocal DAO delegate Marc Zeller reacted harshly to begin with, calling Labs’ proposal “extractive” and a “gaslight.” He sees it as “raiding” DAO tokens “for zero actual enforceable commitment.”

A longer follow-up post was more positive, recognising “victory” for the DAO, while also recognizing that the move is essentially “four proposals in a trenchcoat.”

However, Zeller warns that, in calculating revenue, “deductions are at Aave Labs’ sole discretion. No independent audit. No cap. No DAO approval threshold.”

He also underlines that the $50 million worth of tokens requested represents “31.5% of the entire treasury. For a single service provider. In a single vote.”

Furthermore, the additional 75,000 $AAVE tokens would further increase Labs dominance of DAO voting.

$AAVE voting power

Aave Labs isn’t shy about flexing its muscles during sensitive votes.

In what was branded a “disgraceful” move, Labs triggered a surprise vote on contributor Ernesto Boado’s proposal over the Christmas holidays.

The proposal was voted down with 55% against, while the majority of DAO delegates abstained.

Additionally, Zeller suspects that today’s narrowly-rejected vote on “mandatory disclosures” was, ironically, heavily influenced by undisclosed Labs-linked wallets.

Forking over another 75,000 tokens would only increase Labs’ ability to swing future votes in its favor.