The second-ranked brother is cutting losses and closing all positions; can AAVE, which is deeply mired in opposing emotions, still be bought?

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Author｜Azuma (@azuma_eth)

The leading lending protocol Aave is caught in a whirlpool of public opinion, with the opposing sentiments between the team and the community continuing to escalate, which has objectively affected the confidence of token holders in the AAVE token itself.

In the early hours of today, a second-largest whale holding AAVE, excluding the project team, protocol contracts, and CEX, sold off 230,000 AAVE (worth approximately 38 million USD)), causing AAVE to drop 12% in the short term. It is reported that this “second brother” held AAVE purchased at an average price of $223.4 from the end of last year to the beginning of this year, with today's sell-off average price being around $165, resulting in a final loss of 13.45 million USD.

Odaily Note: This whale address is

Cause of the incident: Dispute over the flow of fees

To clarify the community crisis of Aave this time, we need to start with a recent change in Aave's frontend.

On December 4th, Aave announced a partnership with Cow Swap, adopting the latter as the default trading path for Aave's front-end exchange function (Note: previously ParaSwap), achieving better pricing through the latter's anti-MEV feature.

This initially seemed like a normal feature upgrade, but the community quickly discovered that the additional fees generated by this feature when using ParaSwap (including referral fees or positive slippage surplus fees) would have flowed to the Aave DAO treasury address, but after switching to Cow Swap, they changed to flow to the Aave Labs address.

Community representative EzR3aL was the first to discover this change that Aave did not proactively mention. He questioned the Aave team in the governance forum and speculated that it only tracks Aave's income flow on Ethereum and Arbitrum. This fee is expected to generate around $200,000 in revenue per week, corresponding to an annual revenue of over $10 million — this means that Aave has transferred at least tens of millions of dollars in revenue from community addresses to team addresses, almost unnoticed.

Core controversy: Who really owns the Aave brand?

With the fermentation of the EzR3aL post, a large number of AAVE holders have felt backstabbed, especially considering that Aave did not communicate with the community during this change and did not disclose any information, which somewhat suggests an intention to conceal this change.

In response to community concerns, Aave Labs positively replied under EzR3aL's post, stating that there should be a clear distinction between the protocol layer and the product layer. The exchange feature interface of Aave's front-end is completely operated by Aave Labs, which is responsible for funding, building, and maintaining it. This feature is entirely independent of the DAO-managed protocol, thus Aave Labs has the right to independently decide how to operate and profit… Previously, the income that flowed to the Aave DAO address was a donation from Aave Labs, but it was not an obligation.

In short, Aave Labs' attitude is that the frontend interface and associated features of Aave essentially belong to the team, and the revenue generated from them should also be regarded as company property, and should not be conflated with the protocols and related revenues controlled by the DAO.

Once this statement was made, a heated discussion quickly arose within the community regarding the ownership of the Aave protocol and products. A well-known DeFi analyst previously wrote an article titled “Who Really Owns Aave?” (Who Owns 'Aave': Aave Labs vs Aave DAO), which was also translated into Chinese by Odaily Planet Daily. Those interested can refer to it as supplementary reading.

On December 16, the contradiction was further intensified. Aave's former CTO Ernesto Boado initiated a proposal on the governance forum that day, requesting the transfer of control over Aave's brand assets (including domain names, social media accounts, naming rights, etc.) to AAVE token holders. The related assets will be managed through an entity controlled by the DAO (specific form to be determined later), with strict anti-usurpation protection mechanisms in place.

The relevant proposal has received nearly 10,000 views and over a hundred high-quality replies on the Aave governance forum, with various participants in the Aave ecosystem expressing their opinions below the proposal. Although some voices believe that the execution plan of this proposal is not perfect and raises suspicions of exacerbating divisions, the majority of replies have expressed support.

The founder has expressed their stance, but the community is not buying it.

After the community sentiment has been continuously rising, Aave founder Stani appeared on the forum to respond, stating: “…this proposal leads us in a direction that is detrimental to the Aave ecosystem. It attempts to force a complex legal and operational issue into a simple 'yes/no' vote without providing a clear execution path. Such a complex issue should be handled through a specially designed structured process, reaching consensus through multiple temporary checks and attaching specific solutions. For the reasons mentioned above, I will vote against this proposal…”

From a business operation perspective, perhaps Stani's claim that the proposal is too hasty is not entirely wrong. However, in the current discussion atmosphere, this statement can easily be interpreted as “the Aave founder does not agree to transfer brand assets to token holders,” which clearly exacerbates the opposition between the community and the team.

After Stani's statement, there were even some aggressive comments targeting Stani under the original post, and more users expressed their dissatisfaction through forums or social media. Some OG users mentioned that they first had the idea of liquidating their AAVE, while loyal AAVE supporters stated: “AAVE holders should realize that this is just another DeFi junk coin. It is neither better nor worse than other coins.”

The latest community update is the one mentioned at the beginning of this article, where the second largest holder cut losses and left the market with losses exceeding ten million dollars.

Can AAVE still be bought?

Just two weeks ago, Odaily Planet Daily wrote an article titled “What Did the Smart Money See by Buying AAVE at a Low Position?” At that time, AAVE was still the darling of top institutions like Multicoin Capital, and its excellent brand reputation, substantial capital reserves, clear expansion path, and strong revenue and buyback flow all proved that AAVE is a “true value coin” distinct from other altcoins.

However, in just two weeks, a public relations crisis involving cost attribution, brand control, and team-community relations has quickly plunged AAVE from being a “value coin representative” to the center of controversy, even landing on the short-term decline leaderboard under the impact of emotions.

As of the time of publication, Aave Labs has stated under Ernesto's proposal that it has initiated an ARFC snapshot vote regarding this proposal, allowing AAVE token holders to formally express their positions to clarify the future development direction. The results of this vote and the subsequent attitude of the Aave Labs team are bound to significantly influence the community's faith in Aave as well as the short-term price performance of AAVE.

It is important to emphasize that this event is not merely a “negative news” or “performance change,” but rather a concentrated questioning of Aave's existing governance structure and the boundaries of its rights.

If you believe that Aave Labs will still maintain a high degree of alignment with Aave DAO in terms of long-term interests, and that the current friction is more of a communication and process error, then the price pullback driven by emotions may present a good entry window; however, if you think that the controversy exposed is not an isolated issue, but rather a structural contradiction characterized by long-term unclear rights and lack of institutional constraints between the team and the protocol, then this turmoil may just be the beginning.

From a more macro perspective, Aave's controversy is not an isolated case. As DeFi matures, with protocol revenues becoming genuinely substantial and brands and frontends starting to possess commercial value, some structural contradictions between protocols and products, as well as teams and communities, will come to light. This time, Aave has been thrust into the spotlight not because it is more wrong, but because it has gone further.

The debate about costs, branding, and control goes beyond just AAVE; it is a necessary question that the entire DeFi industry will inevitably face sooner or later.