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🐳 Daily Edition: Crypto Market Stabilizes as Aave DAO Has a Meltdown

🐳 Daily Edition: Crypto Market Stabilizes as Aave DAO Has a Meltdown

The ongoing governance debate may sound boring, but the implications could be massive for how equity and tokens are treated in crypto

Beluga & Will McKinnon
December 22, 2025

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The crypto markets quietly crept up over the weekend, seeing ~$130B added to the overall market cap as Ethereum regains the $3k mark and BTC taps $90k. With only 9 days left in the year and the holidays upon us, we should expect things to stay relatively tame until January comes around. While the price action may not be exciting, we have found ourselves in the midst of the most contentious governance debate in the (short) history of DAOs and DeFi as a whole as recent actions from Aave Labs have pitted them against their own token holders. For brief context, Aave is the largest protocol in DeFi at a whopping $33.6B in TVL, representing 28% of all capital locked in DeFi applications across all chains according to data from DeFiLlama. It currently operates under a DAO model, whereby token holders can vote on proposals to make changes to the protocol and holds rights to the Aave brand, while Aave Labs acts as a private company handling product development.

24 Hour Heatmap, Source: CoinMarketCap

The relationship between the two entities has always been murky admittedly, but until now there has been enough of an incentive alignment that it didn’t need to be called into question. This is a massively complex situation that I can’t fully cover in this edition, but to boil it down, a recent change in swap providers from Paraswap to CoW Swap on the Aave front end saw revenues that historically would have gone to the DAO get redirected to a wallet controlled by Aave Labs. This comes after several attempts by Aave founder Stani Kulechov to launch products and tokens that would dilute the value of the DAO, so understandably token holders are upset. Now, Stani has pushed a half-baked proposal to the voting stage and the disagreement is reaching a climax. Meanwhile, several whales have dumped their entire AAVE stack to show their disapproval… while Stani is quietly accumulating $10’s of millions of the token through purchases on his personal wallet.

As an AAVE holder myself, right now I feel like the meme of Walter White yelling at Hank out the window of the SUV. This was a completely avoidable conflict for a protocol with as bright a future as Aave has, yet it does call into question a core tenet of how tokens are currently designed in crypto. In previous years, nobody really cared that a token did not equal equity; if the underlying protocol was successful, the token would go up, and at the end of the day that’s all that matters. Now that we’re maturing, it turns out those rights actually do matter! We’ve seen several major acquisitions of protocols that have tokens (Padre, Tensor, Axelar Network) this year which have resulted in all of the value going to equity holders, with token holders left holding the bag. If we’re going to play this “liquid venture capital” game, token design needs to mature alongside the rest of the industry.