Aave Governance Clashes Over Sentora’s 50/50 Revenue Split: The Fight Over DeFi Risk Asymmetry

A contentious governance proposal has ignited debate within the Aave community regarding the economic balance between decentralized protocols and third-party risk curators.

Institutional DeFi firm Sentora submitted an Aave Request for Comment to deploy and operate an independent, custom lending market on Aave V4. In exchange for managing risk and driving new liquidity, Sentora proposes a clean 50/50 split of all protocol revenue with the Aave DAO treasury.

However, decentralized risk managers and DAO delegates have pushed back, pointing out an acute asymmetry: Sentora collects half the upside while liquidity providers shoulder all default and bad-debt risk with zero safety-net protection.

Table of Contents

1. The Proposal: Modular Aave V4 Hub & 50/50 Split

2. The Catch: Operational Control vs. Supplier Bad-Debt Absorption

3. The Absence of Umbrella Protection and First-Loss Capital

4. Community & Risk Delegate Pushback

5. What Comes Next for the ARFC

1. The Proposal: Modular Aave V4 Hub & 50/50 Split

The proposal takes advantage of Aave V4’s architectural upgrade: a modular Hub-and-Spoke engine that allows isolated lending pools (Spokes) to plug into centralized liquidity pools (Hubs).

• The Market Setup: Sentora plans to establish an isolated Ethereum deployment focused on institutional stablecoins, featuring an initial deposit cap of 100 million RLUSD and a borrow cap of 90 million RLUSD (with PYUSD and OUSD also planned). It deliberately excludes USDC and USDT under a baseline 20% reserve factor framework.

• The Commercial Bargain: 50% of all generated protocol revenue, including reserve factor income and protocol liquidation fees, would flow directly to the Aave DAO treasury, with the remaining 50% retained by Sentora.

• Zero DAO Overhead: Sentora emphasizes that this revenue stream comes at zero operational expense to the Aave community, bringing institutional volume directly to the protocol.

2. The Catch: Operational Control vs. Supplier Bad-Debt Absorption

The primary point of friction is not the commercial 50/50 split, but the division of day-to-day risk management:

• Sentora Holds the Steering Wheel: Sentora would receive operational roles to independently select collateral, set borrow/lending rate curves, calibrate liquidation thresholds, and configure oracle feeds.

• Immediate Risk Reductions vs. Queued Increases: While emergency freezes and collateral tightening can be triggered immediately by Sentora via a Risk Steward, risk increases require a 48-hour on-chain delay. However, the proposal does not grant the DAO an individual veto/cancellation power during that window; the DAO’s primary recourse is full revocation of Sentora's operational role.

• Suppliers Bear the Shortfalls: If a liquidation fails, such as an oracle failure, cascade illiquidity, or an exploit where a borrower's collateral falls below their borrowed debt, the resulting shortfall is registered directly to the Hub. Under the current design, liquidity suppliers of that borrowed asset bear the deficit entirely.

3. The Absence of Umbrella Protection and First-Loss Capital

Critics have zeroed in on the lack of safety-net mechanisms that standard Aave markets enjoy:

1. No V4 Umbrella Coverage: Aave's core V4 Umbrella framework provides deficit offsets and staked coverage for Core assets like WETH, USDC, and USDT. Sentora’s Hub is explicitly omitted from this coverage, leaving suppliers without the protocol's primary safety net.

2. No First-Loss Tranche: Risk delegates have highlighted that if Sentora wants 50% of the protocol take, it should provide a "first-loss capital" tranche, pledging its own balance sheet or revenue escrow to absorb initial insolvencies before retail and institutional suppliers suffer a haircut. As written, Sentora takes 50% of the upside while exposing zero corporate capital to liquidations.

4. Community & Risk Delegate Pushback

Aave's independent risk delegates have voiced caution regarding moral hazard:

"Allowing external risk managers to dial up leverage, configure oracles, and take half the earnings without having skin in the game sets a dangerous precedent for Aave V4. If things go well, Sentora profits. If things break, suppliers hold the bag."

Furthermore, Aave’s contracted risk providers (such as Chaos Labs and LlamaRisk) have no formal mandate to monitor Sentora’s isolated Hub. Unless a community member independently catches an issue during a 48-hour queue and rallies a governance vote, miscalibrated parameters could pass unmonitored.

5. What Comes Next for the ARFC

The proposal remains in the ARFC (Aave Request for Comment) stage on the official governance forum.

For the proposal to move forward to a binding Snapshot vote and an eventual on-chain Aave Improvement Proposal (AIP), Sentora will likely need to compromise. Forum sentiment suggests delegates will demand either:

1. A lower revenue take (e.g., 80/20 in favor of the DAO), or

2. A mandatory first-loss reserve requirement funded by Sentora before any user deposits are accepted.