Aave’s governance is facing a major schism as one of its most active overseers, the Aave Chan Initiative (ACI), announced it will shut down amid a dispute over transparency and voting power tied to a record budget request from Aave Labs.
ACI founder Marc Zeller said the eight-person team will not seek contract renewal and will wind down operations over the next four months. The group plans to remain engaged in governance during the transition while handing off infrastructure and open-sourcing the tools it built. The move comes only weeks after BGD Labs—the team that developed and maintained Aave’s V3 codebase—said it would step away for similar organizational and strategic reasons.
Why this matters
– Aave is one of DeFi’s biggest protocols, with nearly $27 billion in total value locked across 20 blockchains. Losing two prominent contributors in quick succession raises questions about how the DAO will manage risk, budgets and future upgrades.
– ACI says it drove 61% of governance actions over the past three years, helped deploy $101 million in incentives, and saw the GHO stablecoin grow from $35 million to $527 million in supply while Aave’s DeFi market share rose above 65%. ACI reported it cost the DAO $4.6 million over three years.
The flashpoint: “Aave Will Win”
The immediate catalyst was Aave Labs’ “Aave Will Win” proposal, which requested roughly $51 million in stablecoins plus 75,000 AAVE tokens to fund product development, marketing and expansion tied to Aave V4. The plan also proposed directing revenue from Aave-branded products back to the DAO. That proposal passed its first formal vote over the weekend with about 52% support.
ACI says it asked for four conditions before endorsing the budget, including stricter on-chain milestone tracking and limits on addresses linked to the budget recipient voting on the proposal. According to Zeller, those conditions were ignored. ACI also alleges that addresses tied to Aave Labs cast votes that ultimately tipped the outcome in favor of the budget, and argued this shows “there is no role for an independent service provider” if the largest budget recipient can sway its own approval without full disclosure.
Market reaction
AAVE plunged more than 11% within 24 hours following ACI’s exit, trading near $110, and is down more than 44% over the past year—significantly worse than Bitcoin’s roughly 24% decline in the same period.
How ACI will close out
– ACI plans to submit a direct proposal to cancel its GHO funding stream, transfer 120 days of funding to its treasury address, and return the remainder to the DAO. The group said it prefers a lump-sum settlement because it does not trust the governance process to maintain a streaming payment during the transition.
– After that proposal executes, ACI will cut its AAVE vesting stream.
– Over the next four months ACI will hand off or open-source governance dashboards, incentive frameworks, delegate coordination programs and its committee roles (including seats on the Aave Liquidity Committee and GHO Stewards). The group will step down from those posts at the end of the wind-down.
Broader implications
The departures thrust renewed focus onto real-world limits of decentralization inside large DAOs—where voting power often concentrates with founders, early investors and large delegates. Critics say that when a single entity can meaningfully influence votes on its own funding, independent oversight becomes difficult to maintain.
For users, the immediate impact is limited: smart contracts remain live, lending and borrowing continue, and third-party services such as Chaos Labs, TokenLogic and Certora remain active. Still, the loss of ACI and BGD Labs may reshape how Aave coordinates upgrades, allocates budgets and governs risk going forward.
Aave Labs has not publicly responded to ACI’s announcement.
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