The Aave DAO governs Aave, a decentralized, non-custodial liquidity protocol where users supply assets to earn yield and borrow against overcollateralized positions. Deployed across more than a dozen EVM networks, Aave is consistently the largest lending protocol in DeFi by total value locked — several times the size of its nearest competitors; the live figure is tracked on DeFiLlama. Control over the protocol's parameters, its markets, its treasury, and its native stablecoin rests with holders of the AAVE token, who decide by token-weighted on-chain vote.

Origins and the AAVE token

Aave began as ETHLend and its LEND token. In 2020 the project rebranded to Aave and, after its first governance proposal, migrated LEND to AAVE at a 100:1 ratio (100 LEND → 1 AAVE), going live in October 2020 with a fixed supply of 16 million AAVE — 13 million from the migration and 3 million placed in an Ecosystem Reserve. AAVE (together with staked stkAAVE and aAAVE) confers proportional voting power, and staking it backs the protocol's safety module against shortfall events. (CoinDesk, 2020)

Governance V3 and the proposal lifecycle

Aave Governance V3 is a modular, multi-chain system: a Core network (Ethereum mainnet) holds voting power, low-cost Voting networks tally votes via storage proofs, and Execution networks implement approved payloads across chains, all wired together by the Aave Delivery Infrastructure (a.DI). Holders can delegate voting power and proposition power separately to different addresses. A change moves through a defined lifecycle: forum discussion, a non-binding Temp Check (Snapshot poll), an ARFC (Aave Request for Final Comments) with service-provider review, and finally an on-chain AIP (Aave Improvement Proposal) — an IPFS-stored metadata file plus an executable payload — that must clear quorum before executing behind a one-day or seven-day timelock. Two emergency multisigs — a Protocol Guardian and a Governance Guardian — can pause markets or veto a malicious payload. (Aave docs: Governance; proposal process)

GHO — the DAO's own stablecoin

In July 2023, following a near-unanimous governance vote, the DAO launched GHO, a decentralized, overcollateralized, USD-pegged stablecoin minted directly by borrowers who post collateral in Aave markets. GHO is fully governed by the DAO: governance sets its interest rate, approves the "facilitators" allowed to mint it, and caps their bucket sizes — and 100% of the interest paid on GHO flows to the DAO treasury, turning the stablecoin into a first-party revenue line rather than a fee handed to a third party. (Aave docs: GHO)

Aavenomics — turning fees into token value

For years AAVE conferred votes but no direct claim on protocol revenue. That changed with "Aavenomics," a 2025 tokenomics overhaul that routes surplus revenue back to the token. It introduced a "Buy and Distribute" program that buys AAVE from the open market and moves it to the Ecosystem Reserve; Anti-GHO, a non-transferable reward minted from GHO revenue and burnable against GHO debt; and Umbrella, a redesigned safety module covering bad debt on core assets. In 2025 the buyback was made a standing program of roughly $50M/year, later adjusted downward in 2026 governance — a concrete example of the broader industry shift from pure governance tokens toward value-accruing ones. (Aavenomics ARFC; buyback update)

The service-provider model

The Aave DAO does not employ staff directly; it funds work through service providers — independent risk, finance, development, and delegate teams paid from the treasury by governance vote. Notable contributors include the founding company Avara / Aave Labs (which builds the core protocol), the delegate-and-steward Aave Chan Initiative, technical teams like BGD Labs, and risk providers such as Chaos Labs. Crucially, the DAO is not Aave Labs: Labs must request funding like any other provider, a separation that became visible in 2026 when BGD Labs announced its departure amid a public dispute over Aave Labs' roadmap and accountability, even as the DAO approved a $25M funding package for Labs. It is a live illustration of the recurring tension between a DAO and its closely-associated development company. (Aave governance forum)

How Caper approaches this

Aave spent years retrofitting value accrual onto a token that originally carried none, and it coordinates a sprawling set of service providers through discretionary treasury grants. A caper starts from the other end: funding flows through an on-chain bonding curve into a shared treasury from day one, and every deployment of that treasury is a bounded PAYOUT or INVEST proposal rather than a standing budget — with a member's economic claim realized directly at exit as a pro-rata share. The mechanics are described neutrally on those Caper pages.

References

• Aave documentation — protocol and governance reference.
• Aave Governance Forum — where ARFCs and AIPs originate.
• Aave docs: GHO stablecoin.
• Aavenomics Implementation, Part One — the 2025 buyback / Anti-GHO / Umbrella package.
• DeFiLlama: Aave — live total value locked.