BGD Labs Exits Aave DAO After Four Years

Who Is BGD Labs and Why It Matters

BGD Labs has served as Aave’s primary technical service provider since early 2022. For long stretches, it operated as the DAO’s dominant engineering team.

Its contributions include:

• Aave V3 development and iterations (V3.1 through V3.7 and beyond)
• Governance V3
• Umbrella safety infrastructure
• Safety Module rewrite
• Asset onboarding, scaling, risk parameters, and security frameworks

In short, BGD built and maintained much of the core infrastructure behind Aave’s current $26B+ TVL footprint.

Why BGD Is Leaving

BGD’s governance forum post outlined several key concerns.

1. Asymmetric Power and Centralization

According to BGD, Aave Labs, led by founder Stani Kulechov, has become the central force behind branding, communication channels, and technical direction. They argue this creates an uneven power structure inside what is supposed to be a decentralized DAO.

Aave Labs now leads development of Aave V4 and controls major narrative and voting influence. BGD claims this deviates from merit-based decentralization.

2. Poor Collaboration on V4

BGD stated that Aave Labs built V4 largely independently. Existing contributor teams were sidelined. In some cases, BGD says Labs expected unpaid advice rather than structured collaboration.

This reduced alignment between teams that previously worked closely together.

3. Treatment of V3

Aave V3 remains the dominant and battle-tested lending product. However, BGD argues that recent messaging and proposals implicitly criticized V3 to accelerate migration to V4.

Some proposals suggested pausing improvements or adjusting parameters in ways that could pressure users to migrate before V4 is production-ready. BGD believes V3 still has significant untapped potential.

Transition Plan

BGD emphasized that there will be no abrupt disruption.

• Full scope contributions continue until April 1, 2026
• All code and documentation already reside in DAO-controlled repositories
• V3 is mature and requires minimal ongoing maintenance

Additionally, BGD proposed a two-month transitional security retainer. The DAO would pay $200,000 from April to June 2026 so BGD can handle critical Immunefi reports or security incidents during the handover. Stani Kulechov has already signaled support for this proposal.

Reactions From Major Figures

Stani Kulechov

The Aave founder posted a respectful and appreciative statement. He credited BGD for shaping V3 and acknowledged Ernesto’s historical role in Aave’s growth.

Stani stated there will be zero protocol disruption. He confirmed Aave Labs’ 90-person team will assume maintenance responsibilities. He also pledged to vote in favor of the security retainer.

Marc Zeller (Aave Chain Initiative)

Zeller described the departure as devastating. He called BGD the most productive engineering team in Aave’s history and noted that they “saved Aave more than once.”

He also disclosed selling part of his AAVE holdings following the news.

Ignas (DeFi Analyst)

Ignas published a widely shared thread summarizing BGD’s grievances. He framed the exit as a rage quit driven by governance tensions. He also floated hypothetical scenarios, including potential forks or ecosystem splits, though he labeled them unlikely.

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Market Reaction

The AAVE token fell between 3% and 6% within hours of the announcement. It traded near $118 amid elevated volatility.

The decline reflects uncertainty rather than any technical malfunction. The protocol itself continues operating normally.

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What Happens Next

Short-Term

There is no operational breakage. Aave V3 continues functioning, and Aave Labs will assume direct responsibility for maintenance.

If the DAO approves the security retainer, near-term vulnerability risk remains low.

Governance Debate

This event intensifies the decentralization discussion.

Expect new proposals around:

• Brand and IP control
• Voting power distribution
• Service-provider diversification
• Contributor incentives

The core question is whether Aave is evolving toward centralized execution or recommitting to DAO-driven meritocracy.

Roadmap Implications

Aave V4, which has been in testnet since late 2025, now becomes the undisputed flagship product under Aave Labs.

The DAO must decide whether to accelerate V3 deprecation or maintain dual-track support longer. Poor coordination could create user confusion or TVL fragmentation.

Ecosystem and Competitive Impact

Many describe BGD’s departure as the most significant talent loss in Aave’s history.

If Aave Labs executes smoothly and V4 delivers, the protocol could emerge stronger and more streamlined. However, if governance tensions persist or execution falters, competitors like Morpho or future forks could gain traction.

BGD left the door open to future ecosystem innovation. That includes the possibility of building complementary or competing infrastructure.

What To Watch For Next

Aave remains the largest DeFi lending protocol with solid fundamentals and no immediate operational risk.

However, BGD Labs’ departure marks a clear inflection point. The tension between centralized execution and decentralized governance has moved from theoretical debate to real-world consequence.

How the DAO navigates this transition will shape Aave’s next phase.

$119.01