Daniel Walker
A governance controversy has surfaced within Aave, the largest lending protocol in decentralized finance, after a delegate alleged that recent product changes may be redirecting protocol-linked revenue away from the Aave DAO and toward Aave Labs, the protocol’s primary development company.
The debate centers on how swap transactions are routed through Aave-affiliated interfaces, following the introduction of a new integration powered by CoW Swap.
In an open letter published on Aave’s governance forum, an Orbit delegate and AAVE tokenholder known as “EzR3aL” claimed that onchain analysis shows swap-related fees are no longer flowing into the DAO treasury. Instead, those fees appear to be accumulating at an address not controlled by the DAO, marking a departure from previous arrangements.
EzR3aL pointed to Aave Labs’ earlier integration of Paraswap adapters during the rollout of Aave v2 and v3, which allowed users to swap tokens directly from the Aave interface.
In 2022, Paraswap introduced a referral mechanism that redirected excess execution value to the Aave DAO treasury, without charging users an explicit fee. According to the delegate, this setup created an additional revenue stream for the DAO beyond lending interest and flash loan fees.
By contrast, the newer CoW Swap integration includes an explicit fee of roughly 15–25 basis points per swap, as outlined in Aave documentation. EzR3aL argued that this change fundamentally alters how value is distributed.
Onchain Analysis Points to Significant Fee Flows
Aave Labs began deploying CoW Swap-based swap functionality in mid-2025. By early December, the partnership had expanded further, with new adapters across multiple chains, incentive tooling via Merkl, and a Balancer v3-based flash loan factory announced in recent updates.
Using test transactions, block explorers, and CoW Swap metadata, EzR3aL traced the partner fee field linked to the “aave-v3-interface-widget” to a specific recipient address. That address has reportedly received regular ETH transfers, including approximately 46 ETH on Ethereum on December 4, alongside flows on Arbitrum.
Based on public data and testing, EzR3aL estimated that the fee stream could be worth at least $200,000 per week across supported chains since Q2 2025, though actual volumes may be higher.
Questions Directed at Aave Labs
The delegate raised several unanswered questions, including whether the DAO still receives any portion of CoW Swap-related fees, whether governance was consulted before the change, and whether commercial agreements with CoW Swap influenced the decision.
While framed as questions rather than a formal proposal, the post quickly escalated into a broader debate involving the Aave Chan Initiative (ACI) and Aave founder Stani Kulechov, touching on the broader issue of alignment between Aave Labs and the decentralized community.
ACI Calls the Situation ‘Extremely Concerning’
The Aave Chan Initiative, a key governance contributor led by Marc Zeller, responded publicly on both the forum and X, describing the situation as “extremely concerning.”
Zeller argued that redirecting an estimated 10% of potential DAO revenue using Aave’s brand and intellectual property represents a serious breach of expectations held by AAVE tokenholders.
He emphasized that service providers compensated by the DAO, including Aave Labs, carry a fiduciary responsibility to act in the DAO’s best interest. Historically, Zeller said, monetization of the aave.com frontend — including Paraswap surplus and interface-triggered flash loan fees — was expected to benefit the DAO treasury.
Loss of Multiple Revenue Streams
According to Zeller, the CoW Swap integration may have cost the DAO two separate income sources.
First, the DAO no longer receives Paraswap referral revenue. Second, CoW Swap solvers often rely on Balancer flash loans, which are fee-free, instead of Aave’s, potentially eliminating flash loan income from swap activity.
Zeller also questioned whether the new execution model and added frontend fee are demonstrably better for users, warning that the shift could signal a broader trend of privatizing protocol-adjacent revenue.
Broader Concerns: Horizon, Vaults, and Aave v4
The discussion expanded beyond swaps to other Aave Labs-linked initiatives.
Zeller questioned whether Aave Vaults include embedded fees that accrue exclusively to Aave Labs, and if so, whether any revenue-sharing mechanism with the DAO is planned as the vaults become integral to Aave v4.
He also highlighted Horizon, a product aimed at institutional real-world asset adoption, noting that it has generated roughly $100,000 in visible revenue while consuming about $500,000 in DAO incentives. When factoring in the cost of maintaining GHO’s peg, Zeller suggested the net impact on the DAO could be negative.
Finally, he flagged the proposed Aave v4 liquidation engine, warning that externalizing liquidations could reduce DAO revenue by tens of millions of dollars annually, despite Aave v3’s strong performance during volatile market events.
Stani Kulechov Defends Aave Labs’ Position
Aave founder Stani Kulechov responded in a public X thread, outlining Aave Labs’ perspective.
Kulechov stressed that Aave Labs has operated its own independent, opinionated frontend for over eight years and argued that monetizing that interface is legitimate, particularly for features outside the core protocol.
He explained that while Paraswap-generated surplus was previously passed to the DAO, that decision was voluntary and could just as easily have been returned to users. The CoW Swap integration, he said, was driven by user experience improvements and MEV protection, with development costs covered by Aave Labs.
According to Kulechov, monetization at the interface level does not alter the permissionless Aave protocol, and Aave Labs does not believe the DAO should fund its product development. He maintained that expanding features within the ecosystem ultimately drives higher volumes and long-term value for AAVE holders.
However, Kulechov did not directly address all questions raised regarding fee destinations, vault economics, or Horizon revenue sharing.
