DAOs Aren't Doomed, They Just Need to Evolve: Aave Founder

"There are some things that most founders of DeFi don't want to tell you," says Stani Kulechov. DAOs are currently misrepresented as governance systems, but they do not function properly. They are not technologically broken. Decisions made through high-level governance without a high level of participation or a clear chain of accountability are broken.

On March 10th, he posted it on X. DAOs are incredibly challenging because while creating new blockchain technologies is difficult, the real challenge comes in the form of designing a governance structure for DAOs that doesn't act as an impediment to DAO members.

Stani Kulechov's statement highlights an important point, and the idea warrants further attention.

What the Aave Dispute Actually Revealed

The Aave Labs' funding request entitled "Aave Will Win" — which was approved following a temperature check on 1 March 2026 with 52.58% support and 42% opposition — has been the most direct catalyst for the departure of key developers of Aave (BGD Labs). Importantly, this was not just a close decision, nor was it a trivial issue. This request's purpose is for the DAO to fund Aave Lab's development of V4 through approximately $51 million (100% of Aave Lab's product sales) as the DAO increasingly looks to centralise its intellectual property (IP) and all related assets, including branding and trademarks.

BGD Labs has indicated they will be leaving Aave (as the core developer of the protocol) in March. On 3 March, the Aave Chan Initiative (ACI) — which had the largest governance delegation to Marc Zeller, the lead steward of Aave protocol — also announced it would cease its operations after four months, stating they could not function independently due to the concentrated voting power preventing them from providing independent oversight.

A governance "tightening" plan to put Aave's IP and brand assets fully under the control of the DAO also completely failed in January. This was never a "combat" for governance. In other words, DAO members voted against their own personal power grow, and for the DAO (via the vote not to own their own community). When a DAO will not become responsible for itself, something is wrong.

This situation is made worse because Aave Labs originally moved their revenue source from the front-end of the Aave network to a centralized corporate wallet without permission. The original intention of the "Aave Will Win" initiatives was to highlight this situation. Ulterior motives aside, the community finally reached a consensus against further unilateral decisions (by a very small margin) two or three weeks after launching the Aave Will Win initiative, but the timeline of all these events is still messy.

The Participation Problem Nobody Wants to Address

DAO membership typically falls between 15% and 25% of the total available tokens that represent a full structural issue.

When only a quarter of all token holders participate in all votes, you cannot consider your governance decentralized. The community does not fill the gap. Delegates are independent individuals and organizations who create coalitions, promote agendas, and hold proxied voting rights on behalf of others in their respective DAOs. As Kulechov pointed out, DAOs become politicized very quickly and certain votes evolve into competitions for attention. Participants will create alliances and confer upon themselves the power of the largest votes to assist with getting their own proposals through votes later.

This is not what decentralization means. There are no term limits in a poorly constructed form of representative democracy with an anonymous population.

Kulechov clearly states that he already has plans in place for managing the protocol via on-chain decisions and implementing the required documentation needed as required by law. This is how it should be done. He does not believe that thousands of people should have a say in how the protocol operates, and therefore, thousands of people shouldn't vote on operational decisions either. Kulechov believes that one person needs to make a decision every day based on what they know for that day, and then based on all of that information make a decision on behalf of the protocol based on what they feel is the best course of action to achieve the desired outcome. If the desired outcome is not achieved, the token holders can terminate that contributory token holder/team based on the criteria mentioned in the documentation required by law.

Kulechov's final comments speak to more than any other part of the proposal put together.

The Hybrid Model Is Not a New Idea

Kulechov did not create anything new or original here. The central issue that has yet to be resolved since 2020 with decentralized finance has been the tension between operating speed versus decentralized governance. This was addressed by Compound. MakerDAO has yet to fully realign with this. Uniswap has struggled for two years with governance issues arising from lack of interest from users.

The magnitude of the opportunity in lending distinguishes Aave from the rest. Aave has facilitated over $1 trillion of lending transactions, controlling approximately 30% of the total value of DeFi locked. Kulechov's stated goal is to compete with the global lending infrastructure, which is tens of trillions in size. Waiting six weeks for a product decision to gain consensus via forum is not a viable competitive strategy when attempting to compete with JPMorgan's loan book.

He referenced Google's authority to rearrange and access all the world's data as an example. He feels he has this same authority. However, a 15% participation rate by voters does not define Google's product strategy.

According to Dennison Bertram of Tally, Kulechov's consolidation of Aave under a more traditional corporate structure represents the only viable path forward. David Phelps of Confetti provided a much more definitive framework: private business enterprises should not be DAOs but nation-states should.

Both of them seem to be submitting, rather than making critical observations.

What Kulechov Didn't Say

When the token holders and the founder-led team disagree on a significant issue, he did not clarify what happens to the DAO's power. The hybrid paradigm presupposes a clear division between execution and important decisions. It never is. That gray area is precisely where the money redirection controversy occurred.

There is on-chain accountability. Transparent. The squad may be fired by token holders.

Who determines what constitutes a fireable offense?

The plan offers no response to that query. That's the most important element.