AAVE Falls Over 5%, Entangled in Another Quandary with WLFI Over '7% Fee Split Dispute'

Original Article Title: "WLFI and AAVE Token Split Proposal Conflict, Will the Resolution End in Vain Again?"

Original Article Author: 1912212.eth, Foresight News

In the crypto space, "collaboration" is the norm, and "conflict" is no exception. Recently, the market has been paying attention to the dispute between World Liberty Financial (WLFI) and Aave over a coin split proposal. This event stems from a seemingly mutually beneficial DeFi collaboration proposal but has caused a significant stir due to asymmetric information and denial statements, leading to a short-term 8%+ drop in the AAVE token price.

WLFI, as an open finance project endorsed by the Trump family, originally intended to leverage Aave's DeFi infrastructure to expand its influence. However, the dispute has exposed a pain point in governance transparency in the crypto ecosystem.

Token Split Proposal a Mirage?

The WLFI project was launched in 2024 and is driven by members of the Trump family. With a total token supply of 100 billion, WLFI, as a nascent project, previously sought to collaborate with established DeFi protocols to enhance liquidity.

Previously, the Aave DAO (Decentralized Autonomous Organization) passed a proposal: WLFI would deploy its platform on Aave V3. In return, the Aave DAO would receive a 20% fee split from the WLFI protocol and be allocated approximately 7% of the WLFI total supply (i.e., 7 billion tokens).

This clause was initially seen as a positive development—Aave, as a leading lending protocol, could use this to inject new assets to increase TVL, while WLFI could leverage Aave's user base to accelerate adoption.

Fast forward to August 23, Aave founder Stani.eth responded to questions about "Is the WLFI and AAVE protocol still valid? Are they really building on Aave? There are many different rumors" by stating that the protocol is still valid. He prominently retweeted the view that "at the current price, the Aave treasury will receive WLFI worth $25 billion, making it one of the biggest winners in this cycle," calling it an art of the deal. Subsequently, AAVE surged to touch $385.

However, soon after, purported WLFI Wallet team member Dylan_0x posted to deny the proposal-related news that "Aave will receive 7% of the total WLFI token supply," leading to a brief 5% drop in AAVE.

On August 24, the WLFI team refuted Wu's statement about the "7% token allocation" in relation to blockchain, labeling it as "fake news." The WLFI official stated that while the proposal exists, the distribution terms are not factual, emphasizing that the project's focus is on tokenization innovation rather than external profit sharing.

Aave founder Stani.eth responded below his tweet, stating that the proposal created by the WLFI team has been voted on and approved on the Aave DAO, accompanied by the proposal link.

As of now, the WLFI official account has not issued a formal response to the matter, leading to diverse opinions in the market.

WLFI is set to launch on Ethereum on September 1st, allowing for claiming and trading. Early supporters (0.015 and 0.05 USD rounds) will unlock 20%, with the remaining 80% to be decided by community vote. Tokens for the founding team, advisors, and partners will not unlock.

On September 25, according to Bitget quotes, its pre-market price once reached 0.45 USD, resulting in a fully diluted valuation (FDV) of several billion USD, currently dropping to 0.25 USD. AAVE has fallen below 350 USD.

Is Governance Just Arithmetic?

The DAO governance challenge has persisted from the previous cycle to the present.

Aave founder Stani.eth responded, stating that the proposal is still valid, perhaps merely wishful thinking on one side.

dForce founder Mindao commented on the matter, remarking that the proposal "seems like it was written by a WLFI intern, nothing like a deal signed by the Trump family. The collaboration between Aave and Spark only offered a 10% revenue share. WLFI, with the Trump brand endorsement, logically should receive some additional benefits from Aave. Even if WLFI was aiming for a public offering at the time, it wouldn't have come up with such unfavorable terms. Later on, with the surge of crypto new policies, WLFI issued USD1, transitioning its narrative directly from 'crypto bank' to 'Aave + Circle,' resulting in a 10x valuation increase. After all, Trump wrote Art of the Deal, and this deal is definitely disgraceful."

Additionally, Mindao speculated on the upcoming plot, stating that "WLFI will completely abandon Aave, rendering the previous contract null and void. There will be a massive reduction in token distribution shares. The allocation will be used to incentivize USD1's lending coin minting, it's a win-win situation, effectively serving as an operational subsidy for targeted stablecoin minting."

Twitter KOL Laolu expressed that if WLFI does not intend to give AAVE a 7% token, there is no need to be surprised. "SPK defaulted on a 10% yield and ended up giving only 1%, and it all ended in nothing. WLFI said nicely during the public sale that it would be fully unlocked, but now it has changed to partial unlocking."

Polygon and Aave Once Had a Similar Drama

In December 2024, a conflict erupted between Polygon and Aave due to a Polygon community proposal: to use bridged funds (about $110 million) for yield strategies such as staking rewards.

Aave contributor Marc Zeller opposed this, calling it a "risk strategy," and proposed that Aave withdraw Polygon support to prevent fund misuse. Aave even adjusted the parameters of the Polygon lending platform, setting the LTV to 0, meaning that no further borrowing was possible no matter how much was deposited.

Polygon founder Sandeep Nailwal accused Aave of "monopolistic behavior" and having a "sour grapes mentality," believing that Aave was attempting to suppress competition to maintain its dominance in the lending market.

The conflict escalated to private message threats and public accusations, with Polygon CEO Marc Boiron and Zeller even betting: if Aave withdrew from Polygon, the latter would prove its independence.

Eventually, the proposal was adjusted, and Aave did not fully withdraw, but the relationship remained tense.

It is worth noting that in April 2021, Polygon (with a market value of about $4 billion) provided $40 million worth of 1% MATIC incentives to Aave (at the time with a market value of about $6.5 billion).