Aave Delegate Slams Aave Labs’ Track Record as Governance Dispute Escalates
February 26, 2026 – DeFi Weekly
The governance rift between Aave Labs and the Aave DAO has entered a new phase, with a senior delegate publicly questioning the lab’s historical performance and the justification for a fresh tranche of development funding.
Background
In mid‑February Aave Labs submitted the “Aave Will Win” proposal, requesting an additional $51 million to finance its upcoming development roadmap. The request follows a series of earlier allocations that have already earmarked roughly $86 million, an amount that now represents about 23 % of the total AAVE token supply.
The proposal also reiterated the lab’s strategic emphasis on the forthcoming Aave V4 upgrade, signalling a gradual shift away from the mature V3 architecture. This stance has drawn criticism from other ecosystem participants, most notably BGD Labs, which announced on February 20 that it would suspend its work with the DAO, citing a perceived neglect of the still‑profitable V3 environment.
The Audit from Marc Zeller
Marc Zeller, founder of the Aave‑Chan Initiative (ACI)—another service provider to the DAO—took to the Aave governance forum on February 25 to release a comprehensive audit of Aave Labs’ output to date. The audit, posted as a governance discussion thread, flags three primary concerns:
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Product Delivery – Zeller labels the lab’s standalone offerings—Lens Protocol, GHO v1, and Horizon—as a “product graveyard.” While Horizon has attracted over $500 million in total value locked (TVL), the audit calculates a ‑96 % return on investment, suggesting that the capital deployed has not been recouped.
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Stablecoin Performance – The first version of Aave’s stablecoin, GHO v1, experienced a de‑peg event and required a rebuild by external partners BGD Labs and TokenLogic, further undermining confidence in the lab’s execution capabilities.
- Business‑Development (BD) Partnerships – The audit points out that Aave Labs is courting high‑profile collaborators such as Coinbase’s Base L2, World Liberty Financial, Apollo Global Management, and Mantle. However, it notes that Morpho, a direct competitor in the lending space, already serves as the backend for Coinbase’s decentralized lending product and recently secured a partnership with Apollo, potentially putting Aave Labs at a strategic disadvantage.
Market Context
Despite the governance drama, Aave remains the largest lending protocol by TVL, commanding roughly 28 % of the DeFi market with $27.5 billion locked across multiple chains. Its closest rival, Morpho, sits at $5.8 billion and ranks sixth among all DeFi applications.
Nevertheless, the AAVE token has underperformed relative to its historical peaks. After trading as high as $660 in 2021 and reaching $380 in late 2024, the token now hovers near $122, translating to a fully‑diluted market cap of around $1.9 billion.
Analysis
The escalation underscores a classic governance tension in large‑scale DeFi projects: allocation of scarce capital versus demonstrated ROI. Zeller’s audit attempts to quantify the opportunity cost of continued funding for Aave Labs, arguing that past expenditures have not yielded proportional value.
From the DAO’s perspective, the proposed V4 upgrade is positioned as a long‑term growth catalyst, yet the immediate fiscal impact—another $51 million request—must be weighed against the protocol’s current cash flow and the token’s depressed price. The departure of BGD Labs, a prominent DAO service provider, may signal growing unease among external partners about the DAO’s strategic direction.
Conversely, Aave Labs’ focus on high‑visibility partnerships could be a defensive maneuver to cement its relevance in the evolving DeFi landscape. Securing alliances with major players like Coinbase and Apollo could eventually translate into network effects that offset short‑term product setbacks.
Key Takeaways
| Point | Implication |
|---|---|
| $51 M funding request | Raises the total DAO exposure to Aave Labs to $86 M (≈23 % of token supply). |
| Product performance | Horizon’s TVL is sizable, but its ROI is deeply negative; GHO v1 needed a rebuild. |
| BD competition | Morpho already supplies lending infrastructure to Coinbase and has landed an Apollo partnership, challenging Aave Labs’ partnership narrative. |
| DAO sentiment | BGD Labs’ exit and Zeller’s audit reflect increasing skepticism among DAO delegates. |
| Token price | AAVE remains far below its 2021‑2024 highs, potentially limiting the DAO’s willingness to allocate additional capital. |
Outlook
The governance forum will likely host further debate on the “Aave Will Win” proposal in the coming weeks. Stakeholders will need to balance the long‑term vision of Aave V4 against documented execution shortfalls and the current market environment. How the DAO resolves this funding dispute could set a precedent for future capital allocation decisions across the broader DeFi ecosystem.
Aave Labs has not provided a comment to The Defiant regarding the audit or the funding request.
Source: https://thedefiant.io/news/defi/aave-delegate-slams-aave-labs-track-record-as-governance-dispute-continues
