TLDR
- Aave Labs replaced ParaSwap with CoW Swap, cutting off $200,000 weekly revenue.
- Governance delegates estimate the change results in a $10 million annual revenue loss.
- Aave Labs defends the move as improving execution, not revenue generation.
- Marc Zeller criticizes the move, fearing it signals future issues for the Aave DAO.
A dispute has erupted within the Aave ecosystem over a significant revenue shift after Aave Labs replaced ParaSwap with CoW Swap on its trading platform. This change has reportedly cost the Aave DAO around $200,000 per week in lost revenue, totaling an estimated $10 million annually. While Aave Labs defends the move as a strategic improvement, Aave governance members are raising concerns about its impact on the community and future decision-making.
Aave Governance Conflict Widens Over $10 Million Revenue Dispute
A governance dispute has emerged between Aave DAO and Aave Labs regarding a shift in the protocol’s revenue model. This conflict revolves around Aave Labs’ decision to replace ParaSwap with CoW Swap as the primary infrastructure for trading on Aave’s website.
This change, which governance delegates say has impacted the protocol’s revenue by approximately $200,000 per week, has raised concerns among the Aave community. The lost revenue, estimated at around $10 million annually, was previously directed to the Aave DAO treasury to benefit AAVE token holders. This situation has triggered strong reactions from key figures within the ecosystem.
Governance Delegates React to Revenue Shift
The decision to switch from ParaSwap to CoW Swap has sparked backlash from governance delegates within the Aave ecosystem. The replacement of ParaSwap, which generated referral fees benefiting the Aave DAO, is seen by some as a severe blow to the protocol’s revenue structure.
According to the estimates provided by governance delegates, the change has led to the loss of approximately $200,000 in weekly revenue, totaling around $10 million in annual revenue. This loss would have otherwise contributed to the AAVE token holders, who have a vested interest in the protocol’s financial health.
Marc Zeller, the founder of the Aave Chan Initiative, voiced his concerns about the change, labeling it as a “stealth privatization” of the Aave brand’s assets. He argued that Aave Labs had altered the revenue-sharing model without consulting or obtaining approval from the DAO.
Zeller expressed worry that the unilateral decision would undermine the governance of the protocol and erode trust in the community’s ability to influence key decisions in the future. His remarks raised questions about the handling of future protocol upgrades, including the upcoming V4 update.
Aave Labs Defends the Change
In response to the criticism, Stani Kulechov, the founder and CEO of Aave Labs, provided a defense for the decision to replace ParaSwap with CoW Swap. Kulechov clarified that the revenue previously generated by ParaSwap was not a mandatory protocol fee but rather a “discretionary surplus” that was voluntarily directed to the DAO. He explained that Aave Labs viewed the fees as additional revenue that was not essential to the functioning of the protocol.
Kulechov emphasized that Aave Labs had the right to manage and monetize its front-end interface as it is a privately funded product, separate from the decentralized Aave protocol governed by the DAO.
The firm also clarified that the decision to switch to CoW Swap was driven by the desire to improve execution prices and enhance protection against MEV (Maximum Extractable Value), rather than to increase revenue for the company. Despite acknowledging the lack of communication around the change, Kulechov assured that the update was made with the long-term sustainability of the protocol in mind.
Concerns About Future Governance Decisions
While Aave Labs maintains that the integration of CoW Swap was in the best interest of the protocol, the lack of consultation with the DAO has raised concerns about future governance decisions.
Zeller’s criticism points to broader issues that could arise if future updates and features are similarly implemented without proper community involvement. The decision to replace ParaSwap with CoW Swap, though motivated by technical improvements, has ignited a debate about the relationship between Aave Labs and the Aave DAO.
The upcoming V4 upgrade has already become a point of focus for those worried about the potential for further changes to be made without DAO approval. These concerns suggest that a more transparent communication strategy is necessary to avoid deepening tensions between Aave Labs and the broader community. For now, the Aave ecosystem remains divided over the handling of this recent revenue-sharing issue.
