Aave releases key positive news: plans to share off-protocol revenue with token holders, causing AAVE to surge over 10%

On January 2, 2025, the leading DeFi lending protocol Aave’s core development team, Aave Labs, issued an important announcement, committing to explore sharing “off-protocol” income generated with its governance token AAVE holders, and will soon submit an official proposal to the Aave DAO. This news quickly boosted market confidence, with AAVE price increasing over 10% on the same day, reaching a high of $165.

The proposal aims to address recent core disputes within the community regarding income attribution, brand control, and governance safeguards, marking a significant step for Aave in balancing team innovation with decentralized governance. This move could not only reshape the value capture model of the AAVE token but also set a new standard for governance token economics across the entire DeFi space.

Signal Analysis Behind AAVE’s Single-Day Surge

After weeks of downward trends and intense internal debate, the Aave ecosystem received a strong positive signal at the start of 2025. On January 2, Aave Labs issued a statement on the governance forum, announcing the formal initiation of a process to share off-protocol income with AAVE token holders. The market responded swiftly and positively, with AAVE soaring over 10% in 24 hours, reaching nearly $165 according to major CEX data. This price movement clearly indicates that investors interpreted this news as a major positive, reevaluating the potential value of the AAVE token.

This price rally was not an isolated event; it directly responded to previous valuation declines caused by governance uncertainties. In recent weeks, some community representatives questioned whether Aave Labs’ control over key income channels and brand assets was too strong, putting pressure on AAVE’s market price. Therefore, the team’s proactive commitment to share income was seen as a positive “interest alignment” gesture aimed at repairing trust between the development team and the decentralized autonomous organization (DAO). The immediate market rebound reflects confidence in these efforts.

Deeper analysis suggests that this surge is driven by an upward revision of market expectations regarding AAVE’s ability to capture value. Traditionally, governance token value in DeFi protocols is linked to protocol-generated fees (e.g., lending spreads). Aave Labs’ proposed “off-protocol income” sharing implies that token holders may in the future share revenues from sources such as swap fees on official frontends, profits from new consumer or institutional products, etc. This effectively broadens the basis of AAVE’s value, transforming it from a mere governance tool into a “stakeholder certificate” with rights to a wide range of ecosystem profits.

Dissecting Aave’s New Proposal: Income, Brand, and Governance Safeguards

According to Aave founder Stani Kulechov, the upcoming formal proposal will cover three core and interconnected aspects: the specific mechanism for sharing off-protocol income, the control rights over Aave’s brand and user access portals, and governance measures to protect the interests of the DAO and token holders. The complexity and comprehensiveness of this proposal reflect Aave’s intent to systematically resolve current issues rather than patching them piecemeal.

First and foremost is the definition and sharing scheme of “off-protocol income.” A key concept here is that the Aave protocol itself is an open-source, decentralized set of smart contracts, with income (such as lending spreads) belonging to the DAO treasury. “Off-protocol income” refers to profits generated by products operated by Aave Labs or other entities based on the Aave protocol, such as fees from token swap services integrated into the official frontend. The proposal must clarify: which income sources are included? What is the sharing ratio? How are funds allocated and disbursed? These details will directly determine the tangible benefits for AAVE holders.

Second, brand and gateway control rights are another contentious point. This includes critical assets such as the aave.com domain, official social media accounts, and the main user access frontend. These assets serve as the “face” of the Aave ecosystem and hold significant strategic and commercial value. The proposal is expected to specify the legal ownership, operational permissions, and boundaries for commercialization of these assets. For example, any profit-making activities using the Aave brand without DAO approval could be restricted. Clear rules will help prevent future conflicts arising from asset control ambiguities.

Finally, governance safeguards are essential to ensure the long-term stability of the arrangements. Community representatives have emphasized the need for “clear and enforceable commitments,” rather than vague promises. Therefore, the proposal is likely to include technical guarantees via smart contracts, multi-signature wallet management permissions, and mechanisms for the DAO to enforce accountability if the team fails to fulfill commitments. Establishing reliable checks and balances is crucial for token holders to trust that today’s promises will not be easily overturned tomorrow.

Aave Income Sharing Proposal Key Points

Income Sources: Official frontend (aave.com) swap fees, future consumer/institutional product profits, and other off-protocol revenues

Sharing Target: AAVE governance token holders

Proposal Goals: Clarify profit-sharing mechanisms, ownership of brand assets, and establish governance checks and balances

Background Motivation: Respond to community concerns over income transparency and excessive team control

Market Immediate Feedback: 24-hour AAVE price increase over 10%, reaching $165

Dispute Origins: A Deep Game on Protocol Ownership and Value

The current income sharing proposal is not a sudden move but a concentrated response to long-standing structural conflicts within the Aave community, which have persisted for weeks or even longer. To understand its significance, one must trace back to the root of the controversy—an issue touching on a perennial theme in DeFi: who creates the protocol’s value, and who should capture it?

The direct trigger occurred at the end of 2024 when some community members discovered that Aave Labs, without explicit announcement, was directly allocating the income generated from its operated official website aave.com’s default asset swap (Swap) function into the company’s own accounts, rather than into the public treasury of the Aave DAO. This revelation immediately sparked widespread debate. Critics argued that although the frontend interface was developed by Aave Labs, it serves as the primary entry point for most users accessing the protocol, and its value depends on Aave’s network effects and brand reputation. The exclusive control of this income by the team was seen as a form of “value extraction,” harming token holders’ interests.

In response, Aave Labs explained: “The protocol and the product are different concepts.” They claimed that the frontend interface in question is an independently operated product outside the decentralized protocol managed by the Aave DAO, and thus the company has the right to decide its operation and profit model. However, this “technical correctness” did not quell community anger. Many DAO representatives argued that this logic overlooked the dependency and brand unity in reality. If the core development team can control key user entry points to extract private benefits, the fundamental ownership implied by governance tokens would be severely undermined, potentially leading to a misalignment of incentives between the team and the community.

This debate quickly escalated from a simple income issue to a comprehensive review of Aave’s governance structure, brand asset ownership, and long-term development roadmap. It exposed the inherent tension in rapidly evolving DeFi projects between a vibrant core development team and a community pursuing decentralization. The proactive proposal by Aave Labs to share income can be seen as a significant concession—an effort to balance product innovation autonomy with community-led “protocol supremacy,” seeking a sustainable new equilibrium between the two.

Future Revaluation Path: V4 Upgrade, GHO, and Institutionalization

Beyond the immediate governance dispute, this proposal is closely tied to Aave’s broader long-term strategic vision. Aave Labs has explicitly stated that the protocol must transcend simple crypto lending and expand into real-world assets (RWA), consumer products, and institutional applications. Establishing an income-sharing mechanism aims to better align the ecosystem’s success with token holder interests as part of this vision.

The technical roadmap is the backbone of this vision. The highly anticipated Aave V4 upgrade will be central to the next-generation product suite. Expected features include a more modular, efficient architecture, significantly reduced gas costs, and advanced functions such as risk-isolation pools for specific assets like RWA. These improvements aim to lower user barriers, enhance capital efficiency, and provide a technical foundation for onboarding a broader range of assets and users. Additionally, the further promotion and adoption of the native stablecoin GHO will serve as a key currency bridge connecting DeFi with the broader financial world. A strong, widely used GHO could solidify Aave’s ecosystem position, and its minting fees and other revenue streams might become future sources of value sharing.

Meanwhile, external recognition from traditional finance is creating new momentum. Asset management firm Bitwise submitted on December 31, 2023, applications for 11 crypto ETF strategies to the US SEC, including the Bitwise AAVE Strategy ETF. This ETF plans to allocate about 60% of its assets directly into AAVE tokens. Although the approval date is set for March 16, 2026, and regulatory approval is still pending, the signal is highly significant. It indicates that mainstream financial institutions are beginning to systematically view AAVE and similar top DeFi governance tokens as a distinct, investable asset class. If approved, this could bring unprecedented and sustainable institutional demand for AAVE.

Thus, the current price rally and governance proposal may only be the beginning of Aave’s valuation story. A protocol that resolves internal incentive issues and clarifies income sharing pathways will be better positioned to advance its technological upgrades and ecosystem expansion. When its business extends into the trillion-dollar RWA market and gains backing from traditional financial flows, the value of the “DeFi blue-chip stake” represented by AAVE could be fully revalued. For investors, paying close attention to the upcoming DAO voting results and the implementation of subsequent proposals is more important than chasing short-term price swings.