Aave price tumbles as ‘most productive’ contractor leaves DAO

Aave’s civil war has its first casualty.

Bored Ghosts Developing, a company hired by digital cooperative Aave DAO to provide software development services for the world’s largest decentralised finance protocol, said on Friday it would not seek renewal of its contract in April.

And it blamed Aave Labs, the creator of the that protocol.

In a lengthy post on Aave’s governance forum, Bored Ghosts said it could not continue to work on the latest version of the protocol while Labs attempts to push users to a newer one, dubbed “v4.”

“We believe even proposing this on the main revenue-maker & fully functional engine of Aave, is borderline outrageous,” Bored Ghosts wrote.

The Aave token fell more than 6% on the news on Friday.

In a statement on social media, Aave Labs CEO Stani Kulechov, the protocol’s founder, lamented Bored Ghosts’ departure. Bored Ghosts co-founder Ernesto Boado was previously the chief technology officer at Aave Labs.

“For four years, BGD has played an important role in Aave V3’s technical development, and it is fair to say that Aave V3 would not be what it is today without their contributions,” Kulechov wrote.

Marc Zeller, head of Aave DAO delegate Aave Chan Initiative and one of Labs’ fiercest critics in recent months, called Bored Ghosts’ departure “devastating.”

“Most of the revenue V3 generates today is driven by their code and innovations,” he wrote. “They saved Aave more than once. They’ve been the most productive engineering team this ecosystem has ever had.”

Aave’s ‘crown jewel’

Aave’s stakeholders are caught in a long-running dispute over control of the protocol and the Aave brand. And it could have massive implications for the world of decentralised finance.

Aave is the largest DeFi protocol, with more than $26 billion in user deposits. It has long been managed by the DAO, investors who hold the Aave token and their representatives, known as “delegates.”

Over the past year, however, major delegates began to chafe at Aave Labs’ growing role in DAO affairs.

That culminated in a recent push to demand that Labs transfer brand assets — such as naming rights, social media accounts, and the aave.com website — to the DAO. That proposal narrowly failed in a Christmas Day vote.

In an attempt to settle the dispute, Labs recently proposed directing all of its revenue from Aave-branded products, such as the Aave website, to the DAO.

But that proposal also included language “ratifying” Aave v4 as the “core technical foundation for future development.” That would mean pausing work to improve Aave v3 and even changing its lending and borrowing parameters in order to compel users to migrate to v4.

Bored Ghosts called it an unacceptable attack on the “crown jewel” of the Aave empire.

Aave Labs has said it is willing to slow-walk any efforts to move users to v4.

“At launch, [v4] will serve V3 users with higher capital efficiency and more advanced features,” the company wrote in the governance forum last week.

“That said, there is zero rush. V3 is stable, battle-tested, and will continue to be actively maintained and serviced until users are comfortable migrating to V4 at their own pace.”

A model DAO

The company was founded four years ago, and has almost exclusively worked on Aave since then.

“Any technical sub-system of Aave that the community knows about, BGD Labs was leading its development, or at least participating/collaborating with other entities in it,” the company wrote in its farewell notice.

“Unfortunately, the organisational scenario of the DAO has, during recent times, started to change radically.”

Aave DAO was once a model cooperative. Where other DAOs saw software development priorities turn on the whims of their founders, Aave appeared to be run by tokenholders, just as the first proponents of DeFi had envisioned. Aave Labs was just another service provider, albeit one that controlled the aave.com website and the Aave brand.

That began to change last year as Labs neared completion of Aave v4, according to Bored Ghosts.

“While this pivot is totally legitimate and potentially positive to overall Aave, we believe the way of addressing it has been badly executed,” the company wrote.

“Aave Labs believes that the whole Aave DAO and contributors should pivot in the direction they believe in, without sufficient consideration of existing contributors’ expertise.”

While the DAO controls the direction of the Aave protocol, recent votes suggest Kulechov and other Labs employees retain enough voting power to overwhelm their opponents, according to the company’s critics.

Bored Ghosts is currently serving out a six-month contract for $2.2 million in stablecoins and another 3,000 in Aave tokens, valued at more than $300,000 as of Friday.

That contract ends on April 1. Bored Ghosts said it would request a $200,000, two-month retainer in order to help the DAO transition to a new service provider.

Kulechov said Labs would be willing and able to assume any work as needed.

“Aave V3, and every other part of the Aave protocol stack, will continue to operate as normal,” he wrote.

“We built V3 and will be happy to take on all maintenance work until a time that the DAO votes otherwise.”

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at [email protected].