Chaos Labs has exited the Aave ecosystem after three years as the protocol’s primary risk service provider, citing a budget dispute and fundamental disagreements over risk management.
Founder Omer Goldberg said the decision “was not made in haste,” noting Chaos worked in good faith with DAO contributors and that Aave Labs had offered to increase the budget to $5 million to retain them. Goldberg said the split reflects a growing misalignment over how Aave’s risk should be handled, especially amid the transition to Aave V4.
Chaos handled key back-end functions for Aave V2 and V3 since November 2022, a period during which Aave’s total value locked reportedly rose fivefold to about $26 billion. The topic of risk gained prominence after a user lost $50 million in a trade on March 12, prompting Aave to announce an “Aave Shield” feature aimed at discouraging high-risk trades.
Goldberg argued that V4’s expanded features introduce extra operational and legal exposure that increasingly fell on Chaos. He warned that running V3 and V4 concurrently during migration doubles the workload and that there’s no settled legal framework defining a risk manager’s responsibilities if a protocol fails. “If things work, the work is invisible. If things break, the blame is not,” he said, adding that Chaos was walking away from a $5 million engagement.
Aave Labs CEO Stani Kulechov described the situation differently, saying Chaos proposed becoming the sole risk provider and replacing other partners’ tools — including using its own price oracles in place of Chainlink. Accepting that would have required removing LlamaRisk and abandoning Aave’s two-layer economic risk model, Kulechov said. He added Aave values Chainlink’s track record and its users’ comfort with Chainlink at scale.
Kulechov also said Chaos was already exploring winding down its risk consultancy services and that Aave had offered to double compensation to $5 million to retain the firm. He indicated Chaos’s departure did not disrupt Aave’s smart contracts, token listings, or network integrations. Aave plans to work closely with LlamaRisk to ensure a smooth transition and preserve its two-layer risk approach.
The split occurs amid broader governance disputes over funding and revenue allocation between Aave Labs and the Aave DAO. Despite internal tensions, Aave recently surpassed $1 trillion in cumulative lending volume. Cointelegraph reached out to Chaos Labs for comment.