Is $AAVE Aave on the brink of collapse due to its own DeFi power?

According to a report from CoinWorld, Aave (AAVE), as a leading non-custodial liquidity protocol, has established its major position in the decentralized finance (DeFi) ecosystem, controlling about half of the DeFi lending market share. However, with the cryptocurrency market thriving in a broader bull market in 2025, some issues have arisen within Aave that could have serious consequences for the entire market. The Risks Behind Aave's DeFi Dominance and Market Control According to DefiLama data, Aave's total locked value (TVL) is $36.73 billion. This accounts for nearly 50% of the total TVL of $75.98 billion. Additionally, the protocol's TVL reached a historic high of $40 billion last week. This dominance makes Aave a 'pillar' of the decentralized credit system, enabling users to lend and borrow assets without intermediaries. Nevertheless, this central position also means that if Aave encounters issues, it could trigger a chain reaction throughout the market. But what problems could arise? One key issue is the concentration of power in protocol governance. Previously, Sandeep Nailwal, founder and CEO of the Polygon Foundation, expressed concerns about Aave's governance structure. He emphasized that the protocol is managed by one person (founder Stani Kulechov). Nailwal pointed out that Kulechov has significant control over proposals and voting, effectively operating the platform based on personal preferences. The composition of the user base further exacerbates Aave's vulnerability. Data from Kaiko Research shows that by 2025, large users holding over $100,000 in collateral will rise from 29% in 2023 to 37%. Meanwhile, the proportion of small users with deposits below $1,000 has decreased from 15% to 12% over the past two years. This concentration of power among high-net-worth participants increases the likelihood of liquidity shocks and protocol instability. If these users withdraw en masse or face liquidation events, the impact could spread across interconnected DeFi platforms. Finally, overexpansion also poses significant risks. Aave's deployment across 16 chains has exhausted operational resources. A well-known analyst, Defi Ignas, emphasized on X that some of this expansion has been operating at a loss, increasing financial and technical risks. The impact of these risks goes beyond Aave itself. As one of the main players in DeFi, any disruption—whether stemming from governance failures, user concentration, or overexpansion—could undermine trust in decentralized lending and destabilize the broader ecosystem. Therefore, addressing these challenges is crucial for Aave.