Controversy Erupts in Aave Governance Forum Over CoW Swap Fees

A heated discussion is underway in the Aave decentralized autonomous organization (DAO), which oversees the Aave decentralized finance (DeFi) protocol. The conflict revolves around fees generated from the recent integration with CoW Swap, a decentralized exchange aggregator.

Key Takeaways

Dispute: The Aave DAO is in conflict with Aave Labs regarding the allocation of fees from CoW Swap.
Fee Allocation: Fees from swaps are directed to a private address controlled by Aave Labs instead of the DAO's treasury.
Revenue Concerns: Aave DAO member EzR3aL highlighted that this misallocation could cost the DAO around $10 million annually.
Response from Aave Labs: Aave Labs claims it has the right to manage front-end components and funded the development of the necessary technology.
Community Reaction: Members of the DAO expressed that revenue from the integration should revert back to the DAO since they funded the original technology.

Controversy Erupts in Aave Governance Forum Over CoW Swap Fees

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The disagreement initiated when the pseudonymous Aave DAO member, EzR3aL, pointed out that fees from crypto asset swaps using CoW Swap were being directed to a different on-chain address, one that is not affiliated with the DAO treasury. Instead, these funds are going to a private address under Aave Labs’ control. EzR3aL raised several pressing questions, including the lack of communication with the DAO concerning this fee routing and asserted that these fees rightfully belong to the DAO.

Decentralization, DAO, Aave The governance forum post that ignited the discussion. Source: Aave Governance

“Another entity, rather than the Aave DAO, is receiving at least $200,000 per week in Ether,” EzR3aL remarked, indicating that this totals approximately $10 million in potential annual revenue that is being withheld from the DAO.

In response, Aave Labs defended its actions by stating that it has always managed the front-end aspects of the website and application interfaces. They emphasized that protocol-level decisions, including interest rate policies and smart contract code approvals, remain under the DAO's governance.

Furthermore, Aave Labs argued that it was responsible for funding the development of the “adapters,” which are the lines of code necessary for facilitating swaps and other integrations.

Decentralization, DAO, Aave The total value locked in the Aave protocol, along with a financial overview of the DeFi platform. Source: DeFiLlama

Despite these defenses, many DAO members remain unconvinced, asserting that since the original adapter technology's development was funded by the Aave DAO, the generated revenue should be returned to the DAO.

Marc Zeller, founder of the Aave-Chan Initiative, a delegate platform dedicated to the Aave governance community, expressed his alarm: “Aave Labs, in the pursuit of their own monetization, redirected Aave user volume towards competition. This is unacceptable.”

Cointelegraph reached out to Aave Labs for further clarification but did not receive an immediate reply by the time this article was published.

This situation underscores the complexities involved in operating a DAO, a modern governance model that offers advantages over traditional business frameworks, yet also presents unique challenges.

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