Breaking news! The $AAVE core team has collectively left, is the foundation of DeFi being "privatized"?

Chaos Labs’ exit is not an isolated case. Before that, BGD Labs and ACI had also withdrawn in succession, forming a chain of departures by core contributors. Driving all of this was a six-month-long conflict. On the surface, it appeared to be budget disputes and differences over the V4 architecture, but the deeper issue was structural: outsiders believe that under Aave Labs’ guise of DAO governance, it is actually exercising decision-making power.

The more pressing issue is not a regression of decentralization, but whether Aave—which serves as the core infrastructure for the $ETH virtual machine—can fill the gaps that emerge in risk management and protocol development quickly enough.

On April 6, Chaos Labs, Aave’s risk management entity, announced its exit, citing disagreements in the direction of risk management. The team listed three reasons: First, operational risk is rising. The consecutive departures of core contributors led to the loss of three years of operational experience, with the burden falling directly on Chaos Labs. Second, opposition to the V4 architecture. V4 is a brand-new protocol, and its smart contracts, architecture, and liquidation logic differ from V3. The risk management infrastructure must be rebuilt from scratch, while V3 must continue running; the actual workload of the transition period effectively doubles. Third, structural losses. Operating the Aave contracts for three years, Chaos Labs has remained in a loss position. Even if the budget increases to $5 million, it still cannot become profitable. The team estimates that the minimum risk budget required to maintain both V3 and V4 is $8 million.

Aave founder Stani Kulechov confirmed Chaos Labs’ decision, but offered a different account. He agreed to double the budget to $5 million, but rejected the other three demands: First, appointing a single risk manager. Aave has always maintained a two-layer risk management model, and granting Chaos Labs exclusive control would violate this principle. Second, fully adopting its proprietary oracle. The proposal to replace $LINK with Chaos Labs’ own oracle in all new deployments was rejected due to issues related to existing cooperation with Chainlink and user trust. Third, using the default treasury. Rejecting Chaos Labs’ treasury as the default option for all enterprise-to-enterprise integrations, because that treasury has not yet completed an audit and would deepen vendor lock-in. Stani Kulechov said that protocol operations were unaffected and that he would coordinate with joint risk administrator LlamaRisk to carry out a smooth transition.

The starting point of the conflict was December 2025. At the time, reports indicated that Aave Labs had been routing CowSwap’s partnership fees to its own wallet rather than to the DAO treasury, which triggered the initial dispute. In the same month, an external team responsible for core protocol development, BGD Labs, proposed transferring brand assets to the DAO. The proposal was rejected with 55.29% against votes. Critics argued that the large token holdings associated with Aave Labs changed the voting outcome.

In February 2026, a compromise proposal named “Aave Will Win” passed with 52.58% in favor. The proposal would transfer all revenue of Aave Labs to the DAO. In exchange, the DAO would pay Labs $42.5 million and 75k $AAVE tokens. Supporters believed this formalized the revenue structure and laid the foundation for V4 development. The opposition accounted for 42%, arguing that the issue of fees that should have been resolved—those that were privately redirected—was effectively rewarded with greater spending. ACI founder Marc Zeller claimed that the addresses associated with Labs changed the voting outcome again.

On February 20, 2026, BGD Labs announced its exit, citing that Aave Labs had pushed for the V4 transition unilaterally without negotiating with them, and had imposed artificial constraints on improvements to V3. On March 3, 2026, with BGD’s exit momentum, ACI founder Marc Zeller announced that it would withdraw before July. On March 30, 2026, Aave V4 officially went live on the $ETH mainnet. On April 6, 2026, Chaos Labs officially exited. Throughout the entire process, critical voices remained, claiming that behind the DAO form, Aave Labs effectively held decision-making power.

Chaos Labs’ exit again raises a question: is Aave being privatized? A simple analogy is that Aave was created by Aave Labs, but gradually evolved into an organization resembling a cooperative. External experts such as BGD Labs and Chaos Labs were brought in as operators, and a governance structure was established where token holders vote. Critics argue that the founders who created this cooperative still hold the largest share of voting power. In Aave’s governance, the more tokens one has, the greater one’s voting power. Allegedly, the founder side exercised this power at every key moment.

The core operators began leaving one after another. BGD Labs, ACI, and Chaos Labs all exited in sequence. This is called a cooperative, but who truly holds decision-making power? Does Chaos Labs’ exit mean Aave is being privatized? This outcome may have been foreseeable. Most foundations claim they are DAOs, but in reality, control has always been in the hands of a single actor. Aave was once a rare exception—it genuinely tried to make decentralized governance work.

However, the more honest question is whether the moral question of right vs. wrong still applies here. No serious market participant would treat decentralization as a true operating principle. Decentralization is an ideology, not a tool. What users need is a protocol that runs safely and can protect their assets. If centralized decision-making can achieve this more effectively, then debating the moral issue of “decentralization regression” becomes a luxury, and most protocols have already made that choice.

The real issue isn’t moral—it’s operational: How will Aave Labs fill the gap left behind by the departing contributors? Aave is the core infrastructure of the Ethereum virtual machine, the liquidity layer that supports countless protocols and users. One major incident—an overrun of the risk management failure we’ve already seen—won’t stay local; it will trigger a chain reaction. The loss of contributors is real and worrying. But for the broader ecosystem, the more urgent question is how quickly and how capable Aave Labs can be in filling this gap.

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