Aave Governance Vote Sparks Token Equity Tension. Wintermute CEO Weighs In.

The recent Aave governance vote ended with a massive defeat, indicating that the community strongly opposed a controversial proposal. The proposal, which suggested transferring control of Aave’s brand assets, including its domains and social handles, from Aave Labs to the Aave Decentralized Autonomous Organization (DAO), faced considerable pushback. The snapshot poll closed on Friday, with only 3.5% of voters supporting the proposal, 55.29% voting against it, and 41.21% not participating.

Aave Governance Vote Results: A Clear Rejection of the Proposal

The proposal’s advocates argued that granting the holders of Aave tokens the rights to the intellectual property of the protocol, including domains and naming privileges, would be a major step toward decentralization and explain the brand management within the framework of a decentralized autonomous organization (DAO). 

According to the voting results, however, 55.29% of voters (994.8k AAVE tokens) voted “NAY,” while only 3.5% (63k AAVE tokens) supported the proposal. The refusal brought up important issues in the Aave community regarding the timing and the process of governance. The main problems mentioned in the statement and the debate surrounding it are:

Token Value Capture: The sense that the economic value created by the Aave ecosystem is not sufficiently flowing back to the AAVE token holders. 

Alignment Problems: A structural concern of whether the entity that controls the front-end and brand (Aave Labs) is completely aligned with the interests of the token holders of the protocol that controls the back-end smart contracts.

Governance Process: The particular proposal was controversial, as it was put to a Snapshot vote in the middle of the holiday season without the authorization of the person who originally proposed it and when the discussions were still ongoing, which raised concerns about proper governance procedures. 

Wintermute CEO Evgeny Gaevoy Weighs In on the Rejection

Evgeny Gaevoy, the CEO of Wintermute, one of the largest crypto trading companies, shared his opinion on the governance vote and said that Wintermute had voted against the proposal. Gaevoy pointed to the need to harmonize the long-term objectives of Aave and said that the problem of token value capture is essential to Aave and the DeFi ecosystem in general.

Another issue caused by the rejection of the proposal is the general token-equity structure within Aave. Lido advisor Hasu talked about the inherent problem of mixing governance tokens and detached equity entities and said, “The token-equity dual structure is inherently flawed, which provides perverse incentives. The long-term investors require alignment and not confusion in governance.”

Conclusion: Aave’s Governance Episode Highlights Structural Weaknesses

The rejection of the proposal underscores deeper structural weaknesses within Aave’s token-based governance. Those who opposed the proposal claimed that it compromised participation and transparency due to the fast-tracked Aave governance vote. It was controversial to put the proposal to a snapshot vote when the discussions were still in progress. As of press time, the Aave price is at $154.57, with a market cap of $2.36B and a 3% price rise in the last 24 hours. 

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