Aave struggles as BGD Labs plans April exit amid governance crisis

The Aave ecosystem division has taken another twist after BGD Labs, one of the top service providers to the Aave DAO, said it will quit by early April.

Aave DAO funds and runs the entire ecosystem’s development by sub-contracting service providers such as BGD Labs and Aave Labs. 

In a statement, the team faulted Aave Labs, another ecosystem contributor, for an aggressive push toward centralized control. 

The team decried Aave Labs’ clout, including control of brand rights and voting power, which will make avoiding centralization difficult. 

BGD Labs was the team that built most of the current Aave V3, alongside other contributors, and has been driving its overall maintenance and support. It has supported the ecosystem since 2022. 

However, the team said that Aave Labs is criticizing Aave V3 to promote the upcoming V4. Here, it is worth noting that Aave V4 is primarily developed by Aave Labs. 

Aave Labs responds to BGD exit

In response, Aave Labs and the DeFi founder, Stani Kulechov, ‘reassured’ the community that the ecosystem will be fine even if BGD Labs leave. He said, 

Aave’s governance crisis hit fever pitch late last year. The split became public after the Aave Chan Initiative (ACI), a DAO advocate, claimed that Aave Labs had ‘stolen’ the DAO’s revenue streams from Aave DAO. 

The crisis spooked investors, and the ensuing AAVE sell-off forced Aave Labs to propose a revenue-sharing plan with the DAO. In return, Aave Labs demanded $50 million upfront, nearly 30% of Aave DAO treasury, further raising community scrutiny. 

But there could be more demands, given BGD Labs’ claims and planned exit. For his part, Marc Zeller, founder of ACI and main Aave Labs critic, called the BGD move ‘devastating,’ adding that the team saved Aave more than once. 

For Wintermute founder Evgeny Gaevoy, Aave Labs’ Kulechov may be consolidating his power, but he warned that the division could harm the AAVE token. 

AAVE slipped 8% to $115 after the update. Although it recovered about 3% at the time of writing, the ongoing governance crisis and uncertainty may drag it lower. 

Final Summary 

• One of the Aave ecosystem service providers will leave by April, citing Aave Labs’ excessive push for centralized control 
• Aave token declined by 8% after the update, hinting at investor caution amid the ongoing governance crisis.