Aave is moving closer to its v4 upgrade, but the protocol’s governance tensions are becoming just as central to its next chapter. For months, the debate inside the community has focused on a basic question: should Aave remain a neutral and open platform where anyone can build, or shift toward a more coordinated structure shaped by major contributors? What began as an argument over fees has turned into a broader fight over DAO authority, value capture, and who benefits from the protocol’s growth.
Stani Kulechov, founder of Aave Labs, does not describe the moment as a breakdown. He said the work around Aave has been going on for nearly a decade, and replacing financial infrastructure takes time. In his view, the friction reflects an evolution rather than a collapse.
Fee discussions opened a wider dispute over control
The latest phase of the conflict started in December 2025 with talks about interface fees. Community members debated whether revenue generated by Aave front-end interfaces should flow back to the DAO, the decentralized autonomous organization that oversees governance and the treasury. The DAO rejected proposals that would have diverted those fees from its treasury, but the vote did not settle the issue. It exposed long-running disagreements over incentives and control.
The clash intensified in February 2026 when Aave Labs introduced a proposal titled “Aave Will Win.” Its core idea was straightforward: revenue generated by Aave-branded products should ultimately return to the DAO. Kulechov described the approach as token-centered, while also saying value comes from both the protocol layer and the product layer. Aave Labs is a major development partner rather than the controller of the DAO, yet its proposals and products can still shape how value moves across the ecosystem, including what reaches the DAO treasury.
ACI shutdown and contributor exits sharpened the split
The proposal deepened the divide instead of resolving it. In early March 2026, the Aave Chain Initiative, or ACI, said it would cease operations after conflicts with Aave Labs over the plan. ACI had been one of the DAO’s most active governance groups and had driven much of its governance activity in recent years, so its departure carried weight.
Critics argued that the proposal blurred the boundary between independent DAO governance and the influence of large contributors. Some also said the voting process itself raised questions about how decentralized decision-making really is in practice. The issue is familiar across DeFi: protocols may be governed onchain, but development, coordination, and execution still depend heavily on a relatively small set of core contributors.
ACI’s exit followed the earlier departure of BGD Labs, a key technical contributor behind Aave v3, which cited strategic disagreements. Two important contributor groups stepping away in close succession made the fault lines harder to ignore. Kulechov, though, said such turnover is normal and pointed to similar transitions in Aave’s history.
v4 has been in development for about two years
At the same time, Aave’s next major protocol upgrade is nearing release. According to the source material, v4 has been in development for around two years and is approaching launch after an extended period of security testing and governance review. The upgrade is separate from the recent governance disputes, but it still represents one of the most significant technical changes in the protocol’s history.
At a higher level, v4 is expected to introduce a more modular architecture, making it easier to build new use cases and integrations on top of Aave’s core infrastructure. The design also aims to improve capital efficiency and broaden the range of assets that can be used within the protocol. With the upgrade close and the governance debate unresolved, Aave is dealing with two pressures at once: technical change and a live argument over how the protocol should be run.