Aave DAO Criticizes Aave Labs’ CoWSwap Integration and Revenue Shift

Aave Labs has replaced ParaSwap with CoWSwap in its Aave app interface, sparking a governance debate over the loss of swap-related revenue to the Aave DAO.

This integration redirects revenue from the Aave DAO to external parties, raising concerns about transparency and governance autonomy within the decentralized finance ecosystem.

Aave Labs Swap Strategy Costs DAO Millions Annually

Aave Labs’ recent decision to integrate CoWSwap’s swap solution into app.aave.com, replacing the previously utilized Paraswap route, has ignited an internal DAO dispute over financial and governance implications. EzR3aL, an Orbit delegate, underscores that this replacement effectively redirects 15 to 25 basis points in front-end fees away from the DAO treasury.

With the change, the previously established referral revenue from Paraswap no longer supplements the DAO funds, leaving an annual revenue gap potentially reaching tens of millions of dollars. EzR3aL and Marc Zeller argue that such financial shifts should ideally align with the DAO’s interest.

“The Aave DAO is not receiving the fees from the different swap adapter anymore… A loss to the DAO over 365 days seen by at least over 10m$, assuming a transfer of only 200k$ each week.” — EzR3aL, Orbit delegate, Aave tokenholder

Governance Clash: Application Decisions vs DAO Interests

Did you know? In a similar scenario, Uniswap navigated issues of frontend vs. protocol revenue, highlighting a possible recurring theme in DeFi governance disputes. Like Aave’s case, Uniswap ran into interface monetization controversies, spotlighting the delicate balance in DeFi foundations.

According to CoinMarketCap, Aave (AAVE) stands at $182.28 with a market cap of 2.79 billion dollars. Despite a 1.75% uptick in the past 30 days, AAVE faces a 39.39% decline over three months, reflecting the broader challenges facing the asset.

Expert insights from the Coincu research team suggest that the unfolding governance debate could ripple across DeFi protocols, potentially defining future engagement models between tokenholders and developing entities. The separation between “protocol” and “product” remains a critical issue in this evolving landscape.