Aave token price has dropped over 82% from its peak; ecosystem contributors publish a lengthy article revealing the current operational status

Author: ACI (Aave Chan Initiative)

Edited by: Jiahua, ChainCatcher

ACI is a team of 8 people. Since March 2023, the DAO has paid us $4.625 million. We started working unpaid four months prior. Below are the deliverables.

Currently, the DAO is discussing a single funding request that exceeds the total paid to all other service providers combined. Before token holders vote on any service provider’s budget, they have the right to know what they get in return for every dollar spent. Each service provider should publish a report like this. ACI leads by example and publishes first.

All data here comes from TokenLogic’s public dashboard, DefiLlama, Aave governance forum, or on-chain data. Nothing here requires blind trust. Please verify for yourself.

Core Achievements

Every dollar paid to ACI has generated $29 in protocol revenue growth. We don’t claim all the credit—BGD maintains the codebase, Chaos Labs manages risk, TokenLogic handles treasury, data analysis, and leads BD and institutional trading, and market conditions are equally important. But someone has to turn infrastructure into revenue. That’s our job.

By 2025, $101 million in incentive funds were deployed, with $80 million from external partners who chose Aave precisely because of ACI’s infrastructure and network relationships. GHO grew 15x to $527 million. The AAVE buyback program is now live. Without a dedicated growth team—closest peers are only a fraction of Aave’s revenue—these protocols generate only a small part of Aave’s income.

Revenue: From $5.2M to $142M

Source: TokenLogic Revenue Dashboard.¹ TokenLogic built and maintains the data infrastructure that makes this transparency possible.

Rolling 365-day revenue: $142.9 million (as of Feb 13, 2026)

Starting as unpaid contributors in November 2022, we began receiving paid compensation in March 2023. Since then, the protocol’s annual revenue has grown from $5.2 million to $141.8 million.

V3 launched in January 2023. During this period, BGD continuously delivered protocol upgrades, but the core lending architecture remained unchanged. The 27x revenue increase isn’t because the protocol was rebuilt—V3 was already live. What truly changed was what was built on top: which assets were launched, which chains deployed, which partners brought in funds, which incentives were optimized, and which governance proposals passed. That’s what we do.

It runs on the Aave V3 and eMode architecture built and maintained by BGD. Over 75 governance proposals have driven more than 48% of this revenue through two major strategies.

LRT / eMode Engine

In February 2024, Gauntlet reported WETH borrowing at $1.1 billion, generating $3.87M annual reserve factor income, with loans mainly collateralized by WETH LSTs. We saw this opportunity and built a yield machine around it.

We introduced weETH (Feb 2024), rsETH (May 2024), and ezETH (Aug 2024) into Aave, then configured eMode with 93% LTV for ETH-related trading pairs, enabling capital-efficient cycle borrowing: deposit LRT, borrow wETH, swap for LRT, repeat. Each cycle generates interest for the DAO.

This is a simplified version. The actual design involves multiple layers. LRT holders lend out wstETH. wstETH holders lend out wETH. Demand is built across the entire tech stack, not all LRT compete for the same wETH pool. Borrowing via LRT increases wstETH utilization, raising its deposit rate. Higher deposit rates attract more wstETH deposits, deepening the wETH borrowing pool. Each layer feeds into the next, allowing users and the DAO to earn more at every step.

On-chain data shows: currently, $247.8 million of wstETH is borrowed in Core and Lido markets, with wstETH holders bearing $1.27 billion in WETH debt (22.5% of all WETH loans). LRT / LST collateral drives 97.6% of total WETH borrowing demand.

We increased the reserve factor for LRT to capture more income at each step. We control access: EtherFi gained eMode access to wETH to maintain high capital utilization. Lido has an exclusive instance (TEMP CHECK: Deploy a Lido Aave V3 Instance, approved unanimously via AIP 133 with 702.7 million votes), with its own market and growth trajectory. This maintains good relations with Lido and creates millions of dollars in independent income. WETH utilization on this instance often exceeds 90%.

Morpho cannot replicate this. On Aave, collateral in borrowing pools earns deposit interest—LRT deposits earn re-staking yields plus borrow pool APY. On Morpho, collateral is idle—no deposit income, no compounding. This cycle structure yields higher profits on Aave. We identified this early, built around it, capturing over 85% of this asset class, turning it into over $37 million in annual WETH income.

Key parameter decision: we raised the reserve factor for weETH from 15% to 45% (ARFC: Updating weETH Risk Parameters), doubling the income captured on Aave’s fastest-growing collateral assets.

WETH is Aave’s largest single revenue asset, generating $37 million in 2025 (28% of total protocol revenue). WeETH is the second-largest asset by deposit volume on Aave Ethereum market ($4.47B). ETH-related assets account for 43.6% of all Ethereum V3 deposits.

In ETH terms, this engine is still growing. Borrowed nearly 2.86 million ETH, up 12%. The dollar value decline reflects ETH price drop (from $3,800 to $2,051), not a strategy failure.

On-chain scans (as of Feb 16, 2026, with 2,704 WETH borrowers) confirm the cycle logic at the wallet level. WETH borrowers are 57.9% of all WETH loans: $3.27 billion debt, generating $18.9 million annual reserve income. If expanded to all LRTs we introduced (weETH, rsETH, ezETH, osETH, ETHx, tETH), this ratio rises to 75.1% of total WETH debt ($2.44 billion). Including wstETH, it reaches 97.6%. Nearly all WETH borrowing demand on Aave traces back to our LRT / LST tech stack. These LRT holders also lend out $707 million in stablecoins, generating an additional $3.9 million in annual RF income.

ACI drafted over 35 governance proposals involving LRT deployment, eMode configuration, and parameter optimization across Ethereum, Arbitrum, Base, Scroll, Sonic, and Avalanche.

Ethena / Pendle Flywheel

Ethena / USDe was a core growth narrative for Morpho. We reversed that, turning it into Aave’s revenue engine.

Starting March 2024, we launched sUSDe, then USDe, eUSDe, and Pendle principal tokens (PT) covering multiple maturities. The strategy: use PT as collateral (via eMode with 91-94% LTV) to borrow stablecoins, swap for USDe, re-stake, and repeat.

When USDe launched, we set its reserve factor at 25% (ARFC: Onboard USDe to Aave V3 on Ethereum). This rate is high enough to capture significant income from billions in loans, yet low enough to keep borrowing rates competitive compared to Morpho.

The launch of Pendle PT (TEMP CHECK: Onboard Pendle PT Tokens to Aave V3 Core Instance) was a game-changer. It passed with 69% approval during TEMP CHECK. After debate and controversy, it was finally approved at 99.99% support during ARFC. We pushed a initially controversial strategy that became one of Aave’s largest revenue sources.

Assets related to Ethena (USDe, sUSDe, eUSDe, Pendle PT tokens) generated $12.7 million in direct revenue in 2025. Collateral holders also lent out $1.58 billion in USDC and USDT, earning an additional $5.8 million annually in reserve income. At peak, over 50% of USDe assets in DeFi were stored on Aave.

Aave commands 85% of the Ethena / Pendle lending market. Morpho accounts for 13%, but earns zero protocol revenue. We designed competitive eMode parameters, better liquidity depth, and reserve factors to capture value for the DAO.

Wallet-level analysis (as of Feb 16, 2026, with 2,672 Ethena / Pendle holders) confirms $1.58 billion in stablecoin loans (USDT $1.02B, USDC $0.555B, GHO $6.5M), generating $5.68M annually in RF income, within 2% of the estimated $5.8M. sUSDe, eUSDe, and Pendle PT tokens are only used as collateral (no direct borrowing income); their value lies in creating borrowing demand. USDe on Ethereum ($3.8M) and Plasma ($2.8M) networks directly generate about $6.6M annually.

Overall Impact

On-chain verification (as of Feb 16, 2026; reading across 16 chains, 22 markets, 254 assets):

All four are confirmed on-chain. The difference between full-year TokenLogic data and on-chain snapshot reflects interest rate environment changes (mid-2025 ETH at $3,800, now at $2,051) and lower GHO borrowing rates, not a decline in activity. 97.6% of WETH loans come from LRT / LST holders. Ethena stablecoin loans: 896 borrowers, $1.58B debt, generating $5.68M RF income annually—within 2% of estimates. USDe loans on Ethereum and Plasma generate about $6.6M annually.

Total Asset Revenue (2025)

On-chain confirmed: at current rates, WETH annual income is $33 million (vs. $37 million, the difference due to ETH price decline, not activity). Borrowed ETH increased 12%, from ~2.55M to 2.86M ETH.

Plasma’s story

Plasma is the clearest single case. We drove deployment via Skywards, managed a $7.7M incentive program (WXPL + USDT0 + ETHFI), resulting in $2.3B TVL and $3M revenue in six months. Annualized at current 30-day rate: about $6.5M/year. On-chain scan (Feb 16, 2026) independently confirms $5.9M annual revenue, 7.5% of total V3 protocol income. The Plasma airdrop to the DAO was coordinated by us.

Nothing is eternal

As market conditions shift and PT maturities expire, Ethena’s assets shrank from $6.8B to $2.35B. The LRT engine will eventually mature. Revenue engines decline faster than protocol upgrades are delivered. When building the next engine, someone must keep the current one running.

Since Ethena peaked, we’ve launched or are actively guiding the next generation of revenue assets: Syrup (syrupUSDT, syrupUSDC), USDG, Strata srUSDe PT, frxUSD, USDai / sUSDai, stAVAX. This cycle is continuous: find opportunities, build solutions, optimize parameters, and seek the next.

Operations & Infrastructure

Revenue strategies are only half the work. The other half is keeping the machine running—governance, incentives, partnerships, infrastructure. Every major initiative requires coordination across the entire SP (service provider) ecosystem: drafting proposals, coordinating risk with Chaos Labs and LlamaRisk, implementing with BGD, and guiding proposals through TEMP CHECK, ARFC, AIP, and on-chain execution. The final outcome depends on every team in this chain.

Governance

In the same period, the second-largest entity receiving DAO funds submitted 28 proposals, nearly half about their own budget or products.

Governance is a collective effort. BGD contributes technical upgrade proposals, Chaos Labs updates risk parameters, and community members increasingly participate via Skywards. Our core focuses are strategy, asset onboarding, chain deployment, incentives, and structural reforms.

Dolce Vita aims to reduce the average first reply time on governance forum topics from 300 hours to 48 hours—a 6x speed increase. When managing $27 billion TVL, waiting an extra day for parameter updates costs real money.

Orbit maintained over 80% participation rate throughout 2025. Thanks to every delegate who attended and voted: your participation is vital. Without active delegates, proposals can’t reach quorum, and governance stalls.

Incentive Deployment

In 2025, we managed a total of $101 million in incentives: $21.2M from DAO treasury, $80M from external partners. Both deployed via on-chain liquidity mining and our Merit system.

Deposit activities (2025):
Total DAO-funded deposits: budget $6.5M, net TVL growth $339M.

Borrowing activities (2025):
Total borrowings: budget $2.7M, net TVL growth $168M (109%).

The sGHO program (budget $12M) increased staked GHO from $122M to $265M (+117%), supporting GHO’s peg stability and adoption.

Partner activities—Merit-as-a-Service (MASIv)—attracted $80M external funding, peaking at $5.5B TVL. Largest: Ripple’s $8.5M RLUSD deposit, boosting TVL from $4.9M to $382.8M (+7,707%). These are funded by external partners (Ripple, Ethena, Plasma, Stader, etc.), not DAO treasury. They rely on our infrastructure, network relationships, and combined efforts with TokenLogic’s data analysis and BD.

Not all activities met targets. USDS TVL declined; Sonic USDC down 17%. We cut these and reallocated to more unit-economics-friendly activities. When partners underperform, DAO bears no financial downside—that’s the purpose of MASIv.

We show these failures because we have confidence. USDS underperformed, so we cut spending and reallocated. Sonic USDC declined, so we withdrew budget rather than chase losses. When past performance is strong, showing failures proves the value of success.

Asset onboarding & BD

Skywards helps protocols navigate Aave governance for asset deployment. In 2025, it facilitated over 15 major proposals, including chain deployments (Sonic, Ink, Plasma, MegaETH), asset onboarding (RLUSD, EURC, USDtb, ggAVAX, ETHx, cbBTC), Chainlink SVR integration, HyperLend forks, SP compensation reforms, and AAVE buyback. Every asset launched via Skywards generates ongoing revenue for the DAO. For example, RLUSD alone now earns revenue in a market with over $600M TVL.

All can be verified via on-chain data or governance records.

Ethereum Foundation deposited 30,800 ETH (~$82M) into Aave as part of its 50K ETH DeFi strategy. On-chain confirmation (address 0x9fC3dc011b461664c835F2527fffb1169b3C213e, Feb 16, 2026): 31,405 ETH supplied in Core ($42M) and Lido ($20M) markets, with $2.07M GHO borrowed. This deepens Aave’s WETH liquidity to $62M, enabling the LRT / eMode cycle engine. Throughout, we maintained direct business relations with the Ethereum Foundation. Such institutional funds are not accidental; Aave’s risk framework provides security, and our relationships open doors.

Strategic Leadership

Aavenomics (Aave Economics). We drafted and executed comprehensive reforms: a $50M annual AAVE buyback (now live), activation of protocol revenue sharing via fee switch, and coordination of the Umbrella security module redesign. The buyback is the largest structural change since the LEND migration.

GHO: From $35M to $527M. GHO’s growth is a result of joint efforts with TokenLogic. We designed the sGHO staking framework, managed the $12M incentive program (2025), and drove cross-chain expansion to Base and Avalanche. TokenLogic manages GHO’s peg stability, interest rate calibration, GSM operations, liquidity committee execution, and builds data infrastructure for decision-making. Neither team alone could achieve this.

Grew 15x. GHO generated $12.7M protocol revenue in 2025, ranking fourth by asset size. Unredeemed GHO remains high at $527M. Now promoted as a flagship product on Aave’s UI.

SP Compensation Reform. We drafted the current framework governing how service providers are paid, first applying it to ourselves. Before, we never required payment in AAVE tokens.

Multi-chain Strategy. We proposed and executed a multi-chain focus, including rationalizing underperforming V3 deployments and concentrating DAO resources on chains that generate real revenue.

Market Share

When our third phase started (April 2024), Aave’s share of active DeFi lending was below 50%. By end of 2024, it reached 71.2%. As of Feb 2026, Aave holds 64.7% of active DeFi loans (out of $26.6B total, $17.2B in active loans).

Maintaining 65% share in a highly competitive quarterly market is an achievement. Without dedicated growth providers, Compound’s TVL is $1.2B, with annual revenue around $26M. Morpho, backed by VC funds, earns zero protocol revenue. Same assets, same market—execution makes the difference.

The “Path to 80%” phase aims to reach 80% market share through incentive optimization, new chain deployments, and MASIv partnerships.

Cost Accounting

As background, here are the annual costs of each entity receiving DAO funds:

Source: Latest governance proposals from each SP on Aave governance forum.

The entire service provider ecosystem costs about $30.5M annually, generating $142.9M in protocol revenue. ACI’s cost is $3M—10% of total—covering growth, incentives, partnerships, and governance execution.

What if there was no ACI?

A fair question. Token holders should ask each service provider this.

Without us:

• No incentive management. The $101M activity (DAO + partner funding) would not be designed, deployed, or optimized. Every competitor runs their own incentive programs. Without our mechanisms, Aave’s TVL growth stalls, and competitors narrow the gap.
• No LRT yield engine. The $37M/year cycle engine would not be built. weETH wouldn’t launch. Reserve parameters wouldn’t be optimized. WETH borrowing would stay at $1.1B instead of $5.87B.
• No capture of Ethena funds. At peak, Aave had $6.8B. Without us, these funds would flow to Morpho, which earns zero protocol revenue.
• No Skywards channels. Asset onboarding would rely on individual proposals, delaying or preventing many assets like RLUSD, EURC, USDe, and others.
• No GHO growth engine. The sGHO framework, cross-chain expansion, and $12M incentives are joint contributions. Without us, growth stalls.
• No MASIv partnerships. Without dedicated management, $80M external partner funds wouldn’t flow into Aave.
• No governance throughput. Losing 61% of governance actions (845 proposals, AIPs) and hundreds of forum replies causes bottlenecks, stalling protocol adaptation.
• No cross-SP coordination. Asset onboarding, chain deployment, and economic reforms require coordination across risk, tech, treasury, and governance teams. Without leadership, proposals stall, partner funds delay, and opportunities close before discovery.
• No Plasma. $2.3B TVL and $5.9M annual income directly result from our deployment coordination and incentive management.

Execution is not a one-time event. Revenue engines decline without ongoing effort. If channels aren’t prepared with the next strategy, growth reverses.

Conclusion

Since November 2022, we’ve spent $4.625M of Aave DAO funds. Protocol annual revenue grew from $5.2M to $141.8M. Active loan market share rose from below 50% to over 65%. GHO grew from $35M to $527M. At current 30-day run rate ($218.8M/year), the protocol can recoup all three years of our compensation in about a week. For each dollar of protocol revenue growth, ACI’s DAO cost is only 3.4 cents.

Ask any entity using DAO funds these three questions:

2. What did you deliver? Provide verifiable on-chain evidence, governance infrastructure, coordination work, and partnerships that produced these results.

3. What are the costs? Fully disclose total compensation.

4. What is the return? Revenue generated, TVL created, governance output.

Our answers are above.

The DAO is currently evaluating a $51 million funding request from Aave Labs—more than all other service providers combined. Before voting, token holders should ask the same three questions. This is the deliverable of $4.625 million over three years, with on-chain proof. Apply the same standard to the $51 million request.