Aave after ARFC voting: Governance opposition highlights competitive disadvantage risks

Aave has historically been one of the largest and most mature DeFi lending protocols in the industry. However, the governance vote surrounding the ARFC proposal raised by the end of 2025 exposed fundamental structural challenges facing the protocol. The vote resulted in 64.15% opposition, highlighting deep-seated concerns over centralizing brand assets under DAO control. This decisive opposition signals that the issue is not merely a technical governance matter but suggests a fundamental contradiction between decentralized organization and centralized execution, potentially serving as an early warning of long-term competitive disadvantages for Aave.

The Core of the Governance Dispute: Power Struggles over Brand Assets and Revenue Sharing

The core of the ARFC proposal was to place intangible assets—such as Aave’s domain name, social media accounts, code repositories, and brand rights—under the direct management of the Aave DAO. The background to this proposal involved serious concerns that transaction fees generated through integration with CoW Swap were flowing into addresses controlled by Aave Labs, and that the protocol’s commercialization revenues were not being properly returned to token holders.

The community had been discussing this issue continuously on the governance forum, but on December 22, 2025, a decision was made to proceed with a Snapshot vote without reaching full consensus. The timing coincided with the Christmas holiday, raising questions about participation and the quality of deliberation. Ultimately, the vote results were clear: approximately 494,800 votes (64.15%) against, 253,400 abstentions (32.85%), and about 23,200 votes (3.01%) in favor. This overwhelming opposition indicates that the community remains cautious about radical structural changes such as centralizing brand assets.

Market Sentiment and Valuation Fluctuations Indicated by Opposition Votes

Alongside the governance vote, notable on-chain market reactions were observed. On December 22, 2025, a large holder who had long held 230,000 AAVE tokens sold off their position in parts, converting the proceeds into stETH and WBTC. This sale caused AAVE’s price to drop by about 10% in a short period, briefly falling to $156.

However, market participants interpreted this decline not merely as risk aversion but as a structural concern regarding governance uncertainty. Importantly, this reaction did not negate the fundamental value or technology of the protocol but served as a warning signal about organizational structure and authority ambiguity. As of February 2026, AAVE’s price has recovered to around $127.82, indicating ongoing market adjustments following the vote.

Strengths of the Project Foundation and Organizational Contradictions

Aave’s basic business metrics remain robust. Total Value Locked (TVL) exceeds $33 billion, holding approximately 60% of the DeFi lending market share, confirming its dominant position. The conclusion of SEC investigations in December 2025 reduced regulatory risks and accelerated the protocol’s evolution from a crypto-native DeFi platform to a broader on-chain financial infrastructure with greater interoperability.

Founder Stani Kulechov’s three major strategic initiatives for 2026 are ambitious: complete cross-chain liquidity unification with V4, expanding Horizon RWA to $1 billion, and advancing the Aave App’s mobile accessibility. These reflect long-term growth ambitions. The tokenomics also remain stable, with a total supply of 16 million tokens (circulating 15,191,429), with limited room for new inflation.

Yet, despite these strengths, a fundamental contradiction in governance structure has surfaced. While the ideal division of roles—Aave DAO overseeing governance and Aave Labs executing—appears sound, conflicts of interest and ambiguity over control of brand assets, commercialization revenues, and strategic direction have intensified.

Manifestation of Competitive Disadvantages

These issues pose potential risks of competitive disadvantage across the DeFi landscape. A recent example is Uniswap’s approach. Through the Unification proposal, Uniswap enabled protocol fee switching, approved via DAO vote, and reintroduced a portion of fees into the protocol, continuously burning UNI tokens. This mechanism directly links UNI’s economic value to actual trading volume, with all key decisions made transparently through governance.

In contrast, Aave’s governance process stalls at the voting stage, with unresolved fundamental issues. The dominance of opposition votes and the 32.85% abstention indicate community disagreement with the current aggressive approach, yet also suggest unresolved problems will persist. If this ambiguity over authority and responsibility continues long-term, even with technological and liquidity advantages, organizational uncertainty will likely translate into competitive disadvantages.

Long-term Investment Value and Navigating Uncertainty

Aave’s long-term investment value depends on balancing the protocol’s fundamental competitiveness with its ability to improve governance structures. Currently, the market recognizes the protocol’s technological edge but remains cautious about governance uncertainty.

The 64% opposition figure is not just a rejection but a sign that the community harbors serious doubts about the current power structure. If these issues are not addressed, the protocol may become technically mature but gradually lose competitiveness due to organizational disadvantages. Whether Aave can implement a clear, transparent governance framework like Uniswap’s will be a critical factor in maintaining its competitive edge moving forward.