Good morning.
I’m Mitsui, a web3 researcher.
Today I researched the governance dispute between Aave Labs and Aave DAO.
I’d like to share what I feel is an excellent example of the conflict of interest between the protocol (DAO) and the development company (Labs) that has been unfolding in the discussions over the past few weeks.
The Background of the Governance Controversy
Comments made in the forum
Aave Labs’ rebuttal
Voices of opposition are rising from the community.
Aave Labs’ response once again
Current Governance Structure and Issues/Improvement Measures
Who owns Aave?
TL;DR
The integration of CoW Swap and the handling of front-end fees have sparked a major governance dispute between Aave Labs and the DAO, with concerns raised that traditional revenue is flowing to Aave Labs instead of the DAO.
The community has criticized the lack of transparency and unilateral changes regarding revenue attribution and brand interface control, sparking strong backlash on the governance forum.
Aave Labs asserts that “the separation of protocol and frontend” and “past fees were donation-like” justify the change in revenue distribution, but the controversy continues.
The Background of the Governance Controversy
The controversy was sparked by the partnership with CoW Swap announced on December 4th.
Aave has previously utilized Paraswap, a DEX aggregator, for its swap functionality within the UI.
In June 2022, through a partnership with Paraswap, users could directly swap tokens on the Aave frontend. The positive slippage generated during these swaps became revenue for the Aave DAO. This revenue stream functioned without charging users additional fees, sending approximately $150,000 per week to the Aave DAO treasury.
However, starting around mid-2025, Aave Labs began quietly switching its swap infrastructure to CoW Swap. In June 2025, CoW Swap announced that “Aave’s swap widget is powered by CoW Swap,” and since then, revenue deposited into the DAO via Paraswap has sharply declined.
Then, on December 4, 2025, Aave Labs officially announced on X that “Through our partnership with CoW Swap, we have enhanced the swapping experience on Aave,” and fully launched the new swap feature.
This CoW Swap integration is designed to impose an additional 0.15–0.25% fee on users, which is a major difference from the Paraswap era (where user fees were zero during the Paraswap integration).
Regarding this CoW Swap integration, there was no prior approval or explanation from the Aave DAO concerning the introduction of these fees or changes to revenue distribution. While Aave Labs technically mentioned CoW Swap compatibility in their development updates, they did not explicitly state “who receives these fees” nor did they submit it as a governance proposal for DAO confirmation.
While the change was ostensibly presented as an improvement to user experience (MEV resistance and reduced price impact), from the DAO’s perspective, it amounted to a critical matter affecting revenue sources being advanced “under the radar.” This lack of transparency was viewed as problematic, leading to the current controversy.
Points raised in the forum
These issues were questioned following a point raised in the forum.
On December 11, 2025, EzR3aL, a prominent delegator of the Aave DAO, posted an open letter to the governance forum raising questions about the future of swap fees following the CoW Swap integration.
EzR3aL conducted small test transactions himself and discovered through on-chain analysis that ETH equivalent to the fees was being sent to a specific private address, not the official Aave DAO treasury.
According to his calculations, the fees accumulated at this address from each chain amount to at least $200,000 per week, totaling approximately $10 million annually. This substantial sum is estimated to be flowing to Aave Labs rather than the DAO.
Additionally, it has been pointed out that this change halted the income previously generated from Paraswap, and the flash loan fees that the Aave protocol would have earned are not being generated in CoW Swap transactions (because CoW Swap’s solver utilizes free flash loans from Balancer and others instead of Aave).
EzR3aL characterized these as “losses amounting to tens of millions of dollars for the DAO” and posed the following questions to Aave Labs:
Did Aave Labs make a unilateral decision to cut off the DAO’s referral income?
Aave Labs employees are supposed to work for the DAO, so why did they impose fees on features that were previously free without any notice, thereby shifting the profits the DAO had been earning to the company?
The DAO has paid Aave Labs for UI development and funded other contributors for advanced feature development. Users engage with the Aave site for the DAO-owned protocol (Aave). By utilizing the Aave.com domain, isn’t Aave Labs siphoning off value that rightfully belongs to the DAO, thereby undermining integrity?
Is the switch to CowSwap purely for the users’ benefit? Or was there some kind of transactional agreement (such as kickbacks) between Aave Labs and CowSwap?
Some updates announced by Aave Labs on the forum include matters not discussed within the DAO’s mandate. Why is this? (While it’s acceptable to report off-protocol changes like the recent CowSwap integration on the forum, shouldn’t it be explicitly stated that these fall outside the DAO’s jurisdiction?)
This post generated significant buzz within the community, garnering numerous comments in less than 24 hours.
Particular attention was drawn to the suspicion that “Aave Labs may be capturing revenue generated from brand assets funded and built by the DAO without the DAO’s approval.”
In reality, the Aave DAO is not a legal entity, so it cannot own trademarks or enforce them in court, meaning it does not possess intellectual property. The DAO manages the Aave protocol’s smart contracts and on-chain parameters, but it does not manage the brand itself.
However, past governance proposals explicitly granted the DAO broad rights to use the visual identity “for the benefit of the Aave protocol, the Aave ecosystem, and the Aave DAO.”
EzR3aL cited this content and raised the issue, arguing that “The Aave brand was built and funded by the DAO, and this behavior regarding profits made possible by that brand power constitutes a betrayal of the DAO.”
Aave Labs’ rebuttal
In response to this post, the official Aave Labs account posted a reply stating their position.
Aave Labs’ position is essentially as follows:
