The Aave Chan Initiative, one of the most active governance groups in the Aave DAO, announced its closure following a dispute over transparency and voting power linked to a record budget request from Aave Labs.
Marc Zeller, founder of ACI, announced that the eight-person team will not seek renewal of its contract and will wind down operations over the next four months. The group plans to continue participating in management during that period as it delivers infrastructure and opens up its tools.
The closing marks a turning point for Aave, the leading decentralized finance protocol with nearly $27 billion in total value locked across 20 blockchains.
It comes weeks after BGD Labs, the team that built and maintained Aave’s V3 codebase, said it would also step away due to organizational and strategic disagreements with Aave Labs.
Aave’s governance token, AAVE, has fallen more than 11% in the last 24 hours since ACI’s exit to now trade at $110. That’s a drop of more than 44% in the past year compared to BTC’s 24% drop over the same period.
ACI’s influence
ACI said it drove 61% of government actions over the past three years and helped implement $101 million in incentives. During that time, Aaves GHO stablecoin grew from $35 million to $527 million in supply, and the protocol’s DeFi market share increased over 65%, according to the group’s figures. ACI said it cost the DAO $4.6 million over three years.
The conflict centers on a proposal from Aave Labs titled “Aave Will Win.” The plan asked The DAO to approve up to about $51 million in stablecoins and 75,000 AAVE tokens to fund product development, marketing and expansion related to Aave V4.
It also proposed directing all revenue from Aave-branded products to the DAO. The proposal passed its first formal vote over the weekend with around 52% supporting it.
ACI said it requested four conditions before supporting the proposal, including stricter onchain milestone tracking and restrictions on self-voting at addresses linked to the budget recipient. Those conditions disappeared, Zeller wrote.
The organization claimed that addresses linked to Aave Labs voted on the proposal, ultimately tipping the outcome in their favor. In a post-mortem published on the governance forum, the group said the episode showed there is “no role for an independent service provider” if the biggest budget recipient can influence its own approval without full disclosure.
Aave Labs has yet to issue a response to ACI’s exit.
Settlement
To settle its remaining obligations, ACI will submit a direct proposal to cancel its GHO funding stream and transfer 120 days of funding to its treasury address, with the remainder returning to the DAO.
The group said it chose a lump sum approach because it does not trust the governance process to maintain its current during the transition. After the proposal is executed, ACI will also cut its own AAVE vesting stream.
Over the next four months, ACI plans to release or open source the systems it built. These include governance dashboards, incentive frameworks, delegated coordination programs and its roles on committees such as the Aave Liquidity Committee and GHO Stewards. The Group retires from these positions at the end of the liquidation period.
The departure raises broader questions about decentralization in large DAOs. In theory, token holders control the system, but in practice, voting power is often concentrated around founders, early investors and major delegates.
If a single entity has enough influence, critics say, independent oversight becomes difficult to maintain. The decentralization issue in Aave began to grow after the DAO began to debate who controls the protocol’s interface and who benefits financially from it.
For Aave users, lending and borrowing will continue as normal. Smart contracts remain live and other service providers such as Chaos Labs, TokenLogic and Certora continue their roles.
Still, the loss of two major contributors in quick succession could change how The DAO handles risks, budgets, and future upgrades.
