### **Abstract**
In late December 2025, the Aave DAO faced its most significant existential challenge since the protocol's inception. What began as a technical debate over revenue attribution from the `app.aave.com` frontend devolved into a "hostile takeover" accusation, creating a precedent-setting case study on the decoupling of **Protocol (Immutable Code)** and **Product (Mutable Brand)**. This document analyzes the 164-post governance thread, the unilateral escalation to Snapshot, and the broader implications for decentralized governance.
---
### **1. The Inciting Incident: The "Implicit Agreement" Breaks**
For years, the Aave ecosystem operated on a handshake understanding: **Aave Labs** (formerly Aave Companies, led by Stani Kulechov) acted as the steward of the brand, while the **DAO** (Token Holders) governed the protocol. This alignment fractured when Aave Labs integrated **CowSwap** into the official frontend, directing the surplus/referral revenue to their own corporate entity rather than the DAO treasury.
**The Economic Reality:**
* **Protocol Revenue:** Accrues to the DAO (Reserve Factors).
* **Frontend Revenue:** Historically undefined/negligible, now estimated at **$10M+ annualized** via swap fees and integrations.
**The Community Reaction:**
Token holders, led by large delegates like **EzR3aL** and **Marc Zeller (Aave Chan Initiative)**, argued this was a breach of fiduciary duty. If the DAO funded the protocol's development (via the 2017 ICO and grants), why should a private entity capture the frontend value?
> *"It seems we have been fooled in considering this a natural alignment, and we acknowledge the new reality... When you own $AAVE, what do you actually own?"* — **Marc Zeller (ACI)**
---
### **2. The Proposal: "Token Alignment Phase 1 - Ownership"**
**Author:** Ernesto Boado (`@eboado`), Co-founder of BGD Labs (Aave's Core Tech Service Provider).
**Date:** Dec 16, 2025
Boado published a proposal to formalize the separation of concerns. The core argument was technical and legal: **A DAO cannot be autonomous if it relies on a private "benevolent dictator" for its public face.**
**The Proposed Architecture:**
1. **Asset Transfer:** Transfer "Soft Assets" (Domains `aave.com`, Social Handles `@aave`, Trademarks, GitHub Orgs) to a **DAO-Controlled Legal Wrapper** (e.g., a Cayman Foundation).
2. **Licensing Model:** The DAO would then *license* these assets back to service providers (including Aave Labs) under strict, enforceable terms.
3. **Anti-Capture:** "Strict mechanisms so that no third party can misuse these assets or privately benefit from them."
> *"Not having a resolution on this issue is an existential threat to the DAO model... If a single party can control soft assets like brand, marketing channels, and gateways... all other contributors become de facto subordinated to that party."* — **Ernesto Boado (Post #1)**
---
### **3. The Counter-Argument: Product vs. Protocol**
While Aave Labs did not engage deeply in text battles on the forum, their actions and supported arguments outlined a clear defense: **Composability and Corporate Rights.**
* **The "Neobank" Vision:** Stani Kulechov envisions Aave Labs building a consumer-facing fintech product ("Aave Horizon" / "Aave App") that competes with Revolut or Monzo.
* **The Separation:** They argue `app.aave.com` is a proprietary product built *on top* of the protocol. Just as `Instadapp` or `DeFi Saver` don't pay royalties to the Aave DAO for using the protocol, Aave Labs believes they have the right to monetize their specific frontend interface.
* **Operational Efficiency:** A DAO is too slow to manage a consumer brand. A centralized entity is required for agility in the fintech sector.
> *"The Aave protocol, as a series of smart contracts governed by a DAO, is unconventional... Aave the protocol doesn't need to own a website, a domain name, or even a brand. It exists in perfect and pure form without any of those."* — **setaavefree (Post #11)**
---
### **4. The Escalation: "Shadow Governance"**
On **December 22, 2025**, the debate shifted from a forum discussion to a governance crisis. Aave Labs used their administrative privileges to unilaterally push Boado's proposal to a Snapshot vote, **bypassing the author** and the standard feedback loop.
**The Technical Violation:**
* **Timing:** The vote was scheduled for Dec 23, deep into the holiday season when institutional delegates are less active.
* **Consent:** The proposal author (Boado) explicitly stated he did *not* approve the text for voting.
**The Fallout (Post #120-130):**
The forum exploded with accusations of a "Hostile Takeover." The market responded with a **~10% drop in $AAVE price** and a $37M whale sell-off, pricing in the governance risk.
> *"To be very clear about it: Aave Labs has, for some reason, decided to rush to vote unilaterally my proposal... This type of action breaks all types of trust... For me, the current Snapshot proposal created by Labs is nonexistent."* — **Ernesto Boado (Post #124)**
> *"This did not have to escalate this way... What started as a push for clarity... is now turning into a hostile takeover attempt by Labs."* — **Marc Zeller (Post #123)**
**Aave Labs' Defense:**
Stani Kulechov argued on X (formerly Twitter) and via spokespeople that the "extensive discussion" (5 days) was sufficient and that "voting is the best way to resolve" the gridlock.
---
### **5. Technical Analysis: The "Wrapper" Solution**
The debate highlights a critical flaw in current DAO architectures: **The Missing Link between On-Chain Code and Off-Chain IP.**
| **Component** | **Current State** | **Proposed State (Wrapper)** |
| :--- | :--- | :--- |
| **Smart Contracts** | Owned by Token Holders (Timelock) | Owned by Token Holders (Timelock) |
| **Domain (DNS)** | Owned by Aave Labs (Private Co) | Owned by DAO Legal Wrapper |
| **Frontend Code** | Closed Source / Private | Licensed to DAO or Open Source |
| **Revenue Stream** | Split (Protocol=DAO, Frontend=Labs) | Unified or Strictly Licensed |
**The "Poison Pill" Threat:**
Some delegates (Post #113, #118) discussed extreme measures, such as forking the frontend, redirecting liquidity incentives to a new DAO-owned frontend, or even "hiring" a new development team to replace Aave Labs entirely. This demonstrates that while the *code* is immutable, the *social consensus* is highly volatile.
### **Conclusion**
The 164-post thread of Proposal 0xbc60 serves as a warning to all maturity-phase DAOs. The **"Implicit Agreement"**—that founders will always act in the DAO's best interest—is a single point of failure.
* **If the DAO votes YES:** It forces a legal confrontation over IP transfer, potentially leading to a fork if Aave Labs refuses to comply.
* **If the DAO votes NO:** It establishes a precedent that "Service Providers" can capture the protocol's frontend value, effectively demoting the DAO to a backend infrastructure provider with no control over its customer relationship.
**Final Verdict:** The decentralized finance stack is composable, but **trust is not.**
In late December 2025, the Aave DAO faced its most significant existential challenge since the protocol's inception. What began as a technical debate over revenue attribution from the `app.aave.com` frontend devolved into a "hostile takeover" accusation, creating a precedent-setting case study on the decoupling of **Protocol (Immutable Code)** and **Product (Mutable Brand)**. This document analyzes the 164-post governance thread, the unilateral escalation to Snapshot, and the broader implications for decentralized governance.
---
### **1. The Inciting Incident: The "Implicit Agreement" Breaks**
For years, the Aave ecosystem operated on a handshake understanding: **Aave Labs** (formerly Aave Companies, led by Stani Kulechov) acted as the steward of the brand, while the **DAO** (Token Holders) governed the protocol. This alignment fractured when Aave Labs integrated **CowSwap** into the official frontend, directing the surplus/referral revenue to their own corporate entity rather than the DAO treasury.
**The Economic Reality:**
* **Protocol Revenue:** Accrues to the DAO (Reserve Factors).
* **Frontend Revenue:** Historically undefined/negligible, now estimated at **$10M+ annualized** via swap fees and integrations.
**The Community Reaction:**
Token holders, led by large delegates like **EzR3aL** and **Marc Zeller (Aave Chan Initiative)**, argued this was a breach of fiduciary duty. If the DAO funded the protocol's development (via the 2017 ICO and grants), why should a private entity capture the frontend value?
> *"It seems we have been fooled in considering this a natural alignment, and we acknowledge the new reality... When you own $AAVE, what do you actually own?"* — **Marc Zeller (ACI)**
---
### **2. The Proposal: "Token Alignment Phase 1 - Ownership"**
**Author:** Ernesto Boado (`@eboado`), Co-founder of BGD Labs (Aave's Core Tech Service Provider).
**Date:** Dec 16, 2025
Boado published a proposal to formalize the separation of concerns. The core argument was technical and legal: **A DAO cannot be autonomous if it relies on a private "benevolent dictator" for its public face.**
**The Proposed Architecture:**
1. **Asset Transfer:** Transfer "Soft Assets" (Domains `aave.com`, Social Handles `@aave`, Trademarks, GitHub Orgs) to a **DAO-Controlled Legal Wrapper** (e.g., a Cayman Foundation).
2. **Licensing Model:** The DAO would then *license* these assets back to service providers (including Aave Labs) under strict, enforceable terms.
3. **Anti-Capture:** "Strict mechanisms so that no third party can misuse these assets or privately benefit from them."
> *"Not having a resolution on this issue is an existential threat to the DAO model... If a single party can control soft assets like brand, marketing channels, and gateways... all other contributors become de facto subordinated to that party."* — **Ernesto Boado (Post #1)**
---
### **3. The Counter-Argument: Product vs. Protocol**
While Aave Labs did not engage deeply in text battles on the forum, their actions and supported arguments outlined a clear defense: **Composability and Corporate Rights.**
* **The "Neobank" Vision:** Stani Kulechov envisions Aave Labs building a consumer-facing fintech product ("Aave Horizon" / "Aave App") that competes with Revolut or Monzo.
* **The Separation:** They argue `app.aave.com` is a proprietary product built *on top* of the protocol. Just as `Instadapp` or `DeFi Saver` don't pay royalties to the Aave DAO for using the protocol, Aave Labs believes they have the right to monetize their specific frontend interface.
* **Operational Efficiency:** A DAO is too slow to manage a consumer brand. A centralized entity is required for agility in the fintech sector.
> *"The Aave protocol, as a series of smart contracts governed by a DAO, is unconventional... Aave the protocol doesn't need to own a website, a domain name, or even a brand. It exists in perfect and pure form without any of those."* — **setaavefree (Post #11)**
---
### **4. The Escalation: "Shadow Governance"**
On **December 22, 2025**, the debate shifted from a forum discussion to a governance crisis. Aave Labs used their administrative privileges to unilaterally push Boado's proposal to a Snapshot vote, **bypassing the author** and the standard feedback loop.
**The Technical Violation:**
* **Timing:** The vote was scheduled for Dec 23, deep into the holiday season when institutional delegates are less active.
* **Consent:** The proposal author (Boado) explicitly stated he did *not* approve the text for voting.
**The Fallout (Post #120-130):**
The forum exploded with accusations of a "Hostile Takeover." The market responded with a **~10% drop in $AAVE price** and a $37M whale sell-off, pricing in the governance risk.
> *"To be very clear about it: Aave Labs has, for some reason, decided to rush to vote unilaterally my proposal... This type of action breaks all types of trust... For me, the current Snapshot proposal created by Labs is nonexistent."* — **Ernesto Boado (Post #124)**
> *"This did not have to escalate this way... What started as a push for clarity... is now turning into a hostile takeover attempt by Labs."* — **Marc Zeller (Post #123)**
**Aave Labs' Defense:**
Stani Kulechov argued on X (formerly Twitter) and via spokespeople that the "extensive discussion" (5 days) was sufficient and that "voting is the best way to resolve" the gridlock.
---
### **5. Technical Analysis: The "Wrapper" Solution**
The debate highlights a critical flaw in current DAO architectures: **The Missing Link between On-Chain Code and Off-Chain IP.**
| **Component** | **Current State** | **Proposed State (Wrapper)** |
| :--- | :--- | :--- |
| **Smart Contracts** | Owned by Token Holders (Timelock) | Owned by Token Holders (Timelock) |
| **Domain (DNS)** | Owned by Aave Labs (Private Co) | Owned by DAO Legal Wrapper |
| **Frontend Code** | Closed Source / Private | Licensed to DAO or Open Source |
| **Revenue Stream** | Split (Protocol=DAO, Frontend=Labs) | Unified or Strictly Licensed |
**The "Poison Pill" Threat:**
Some delegates (Post #113, #118) discussed extreme measures, such as forking the frontend, redirecting liquidity incentives to a new DAO-owned frontend, or even "hiring" a new development team to replace Aave Labs entirely. This demonstrates that while the *code* is immutable, the *social consensus* is highly volatile.
### **Conclusion**
The 164-post thread of Proposal 0xbc60 serves as a warning to all maturity-phase DAOs. The **"Implicit Agreement"**—that founders will always act in the DAO's best interest—is a single point of failure.
* **If the DAO votes YES:** It forces a legal confrontation over IP transfer, potentially leading to a fork if Aave Labs refuses to comply.
* **If the DAO votes NO:** It establishes a precedent that "Service Providers" can capture the protocol's frontend value, effectively demoting the DAO to a backend infrastructure provider with no control over its customer relationship.
**Final Verdict:** The decentralized finance stack is composable, but **trust is not.**