With the second-largest investor selling off his entire portfolio at a loss, and AAVE embroiled in conflicting sentiments, is it still a good buy?

Original article | Odaily Planet Daily ( @OdailyChina )

Author｜Azuma ( @azuma_eth )

Leading lending protocol Aave is embroiled in controversy, with escalating tensions between the team and the community, which has objectively impacted the confidence of AAVE token holders in the token itself.

Early this morning, the second-largest AAVE holder (excluding project owners, contract holders, and CEX holders) liquidated 230,000 AAVE tokens (worth approximately $38 million), causing AAVE to drop 12% in the short term. It is understood that this "second-largest holder" bought AAVE at an average price of $223.4 from the end of last year to the beginning of this year, and sold it today at an average price of approximately $165, ultimately incurring a loss of $13.45 million.

• Odaily Note: The address of this whale is https://debank.com/profile/0xa923b13270f8622b5d5960634200dc4302b7611e .

Cause of the incident: Dispute over the flow of funds

To understand Aave's current community crisis, we need to start with a recent change to Aave's front-end.

On December 4, Aave announced a partnership with Cow Swap, adopting the latter as the default trading path for Aave's front-end exchange functionality (Odaily note: previously ParaSwap), leveraging Cow Swap's MEV protection to achieve better quotes.

This was supposed to be a normal feature upgrade, but the community quickly discovered that when ParaSwap was used, the additional fees generated by the feature (including referral fees or positive slippage surplus fees) would have flowed to the Aave DAO treasury address, but after switching to Cow Swap, they flowed to the Aave Labs address instead.

Community representative EzR3aL first discovered this change, which Aave had not actively mentioned. He questioned the Aave team in the governance forum and estimated that, based solely on tracking Aave's revenue flow on Ethereum and Arbitrum, this fee was expected to generate around $200,000 per week, corresponding to an annualized revenue of over $10 million. This means that Aave transferred at least tens of millions of dollars in revenue from the community address to the team address without almost anyone knowing.

The core controversy: To whom does the Aave brand actually belong?

As the EzR3aL post gained traction, many AAVE holders felt betrayed, especially considering that AAVE made this change without communicating with the community or disclosing it at all, suggesting an attempt to conceal the change.

In response to community questions, Aave Labs directly replied to EzR3aL's post, stating that there should be a clear distinction between the protocol layer and the product layer. The redemption functionality interface on the Aave frontend is entirely operated by Aave Labs, which is responsible for funding, building, and maintaining it. This functionality is completely independent of the protocol managed by the DAO, therefore Aave Labs has the right to independently decide how to operate and profit from it… The revenue previously flowing to the Aave DAO address was a donation from Aave Labs, but not an obligation.

In short, Aave Labs' stance is that Aave's front-end interface and related functions are essentially team products, and the revenue generated from them should also be considered company property and should not be confused with the agreements and related revenue controlled by the DAO.

This statement quickly sparked heated discussions within the community regarding the ownership of the Aave protocol and its products. A well-known DeFi analyst wrote an article titled "Who Owns 'Aave': Aave Labs vs Aave DAO," which Odaily Planet Daily also reprinted in Chinese translation; those interested can refer to it for further reading.

On December 16, the conflict escalated further. Ernesto Boado, former CTO of Aave, initiated a proposal on the governance forum that day, demanding the transfer of control of Aave's brand assets (including domain names, social media accounts, naming rights, etc.) to AAVE token holders. These assets would be managed through an entity controlled by the DAO (the specific form to be determined later), with a strict anti-embezzlement protection mechanism in place.

The proposal garnered nearly 10,000 views and hundreds of high-quality responses on the Aave governance forum, with various participants within the Aave ecosystem expressing their opinions below it. While some voices argued that the proposal's implementation plan was inadequate and potentially exacerbated conflict, the majority of responses expressed support.

The founder made a statement, but the community didn't buy it.

As community sentiment escalated, Aave founder Stani responded on the forum, stating: "...This proposal is leading us in a direction detrimental to the Aave ecosystem. It attempts to forcibly simplify a complex legal and operational issue into a simple 'yes/no' vote, without providing a clear path forward. Such complex issues should be addressed through a specially designed, structured process, reaching consensus through multiple ad-hoc checks and concrete solutions. For these reasons, I will vote against this proposal... "

From a business operations perspective, Stani's claim that the proposal was too hasty may not be wrong. However, in the current discussion atmosphere, this statement can easily be interpreted as "Aave founders disagree with transferring brand assets to token holders," which obviously further exacerbates the antagonism between the community and the team.

Following Stani's statement, some offensive comments targeting him appeared below the original post. Many more users expressed their dissatisfaction through forums and social media. One OG user mentioned that he had his first thought of liquidating his AAVE holdings, while a staunch AAVE believer stated, " AAVE holders should realize that this is just another piece of DeFi garbage. It's neither better nor worse than other coins. "

The latest community update is what was mentioned at the beginning of this article: the second-ranked player cut his losses and left the market after losing tens of millions of dollars.

Is it still possible to buy AAVE?

Just two weeks ago, Odaily Planet Daily published an article titled " What Did the Smart Money That Rushed to Buy AAVE at Low Prices Really See? " At that time, AAVE was still a favorite of top institutions such as Multicoin Capital. Its excellent brand reputation, strong accumulated funds, clear expansion path, and robust revenue and buyback flow all proved that AAVE was a "real value coin" unlike other altcoins.

However, in just two weeks, a public opinion crisis involving issues ranging from fee allocation to brand control and team-community relations caused AAVE to quickly fall from being a "representative of value coins" into the center of controversy, and even topped the short-term decline list due to emotional shocks.

As of this writing, Aave Labs has announced the initiation of an ARFC snapshot vote on Ernesto's proposal, allowing AAVE holders to formally express their stance and clarify the future direction. The outcome of this vote and the subsequent actions of the Aave Labs team will undoubtedly have a significant impact on Aave's community confidence and its short-term price performance.

It is important to emphasize that this incident is not simply a "negative news" or a "change in performance," but rather a concentrated examination of Aave's existing governance structure and the boundaries of its rights.

If you believe that Aave Labs will remain highly aligned with Aave DAO in terms of long-term interests, and that the current friction is more of a communication and procedural error, then the price pullback driven by sentiment may be a good entry point. However, if you believe that this dispute exposes not an isolated problem, but a structural contradiction stemming from long-standing ambiguity in the rights and interests of the team and the agreement, and a lack of institutional constraints, then this turmoil may just be the beginning.

From a broader perspective, Aave's controversy is not an isolated case. As DeFi matures, protocol revenues become genuinely substantial, and brands and front-ends begin to possess commercial value, structural contradictions between protocols and products, and between teams and communities, will surface. Aave has been thrust into the spotlight this time not because it made more mistakes, but because it went further.

This debate about fees, branding, and control involves far more than just AAVE; it's a question that the entire DeFi industry will inevitably have to answer sooner or later.