Crypto: Why the Launch of Aave V4 Triggers a Crisis in the DAO
The most used DeFi protocol in the world is going through an unprecedented turbulence zone. The deployment of Aave V4 on Ethereum, presented as a major breakthrough for the crypto ecosystem, has instead opened deep fractures within its own organization. Between dramatic departures, catastrophic transaction and governance war, Aave is currently playing one of the most delicate parts of its history.
In brief
- Aave Labs submitted a governance proposal on March 13, 2026, to deploy Aave V4 on Ethereum.
- A user lost almost all of $50 million during a poorly executed swap via the Aave interface, recovering only $36,000.
- BGD Labs, a key technical contributor for four years, announced its departure from the DAO as of April 1, 2026.
- Marc Zeller, founder of the ACI, refuses to support V4 and openly criticizes the current Aave leadership.
A proposal that crystallizes tensions
On March 13, 2026, Aave Labs published on its governance forum a proposal to deploy Aave V4 on the Ethereum mainnet.
The presented architecture relies on a system of shared liquidity pools, common reserves on which several lending markets can rely via limited credit lines. A modular approach designed to strengthen the security and adaptability of the protocol.
On paper, the ambition is legitimate. Aave Labs claims that V4 is the result of 345 cumulative days of audits, formal verifications, and a public security program with a budget of $1.5 million. However, behind the scenes of the DAO, the atmosphere is much less serene.
BGD Labs, the main technical contributor to Aave for four years, announced in February that it would not renew its contract beyond April 1, 2026.
The stated reason is clear: increasing centralization around Aave Labs and a misleading presentation of Aave V3’s performance, used to justify the switch to V4. This departure deprives the protocol of irreplaceable technical expertise, accumulated over hundreds of critical decisions.
The $50 million crypto swap that ignited the powder keg
While governance tension was already brewing, an incident on March 12 set the powder keg on fire. A user attempted to convert $50 million into aEthUSDT via the CoW protocol and the Aave interface.
Result: the order was directed to nearly empty liquidity pools, causing a brutal collapse of the execution price. In the end, the user only recovered $36,000, a loss of over 99%.
Stani Kulechov, founder of Aave, clarified that the interface had indeed displayed warnings of high slippage with mandatory validation by the user. Aave also announced the reimbursement of $600,000 of fees charged on the transaction. However, this did not calm Marc Zeller, founder of the Aave Chain Initiative (ACI).
In a sharp message posted on X, he reminded that the old interface imposed a strict 30% slippage cap. Now, he writes with biting irony:
“Users can fully enjoy the power of DeFi with a 99% slippage.”
The next day, he went further, believing that the user protection philosophy that forged Aave’s identity now seems outdated. “Aave now has new cooks in the kitchen“, he concluded.
Despite the crisis, the fundamentals remain solid: 155,000 monthly active users in February, doubling in six months, and 86% of revenues generated on Ethereum, the very place where V4 must deploy.
In short, Aave is not in its death throes. However, if the protocol fails to reconcile its historic contributors with its new vision, it is its governance itself, its main decentralizing asset in the crypto ecosystem, that risks being eroded permanently.
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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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