Chaos Labs has left the Aave ecosystem after three years as the protocol’s primary risk service provider, citing a budget disagreement and fundamental differences over how risk should be managed during Aave’s move to V4. Founder Omer Goldberg said the exit was carefully considered, that Chaos negotiated in good faith with DAO contributors, and that Aave Labs had offered to raise compensation to $5 million in an attempt to retain the firm.
Chaos managed important backend risk functions for Aave V2 and V3 beginning in November 2022, a period during which Aave’s total value locked reportedly grew roughly fivefold to about $26 billion. Risk became a focal point after a trader lost about $50 million on March 12, an event that prompted Aave to announce an Aave Shield feature intended to discourage high-risk positions.
Goldberg argued that the broader feature set in V4 creates added operational and legal exposure that has increasingly fallen on Chaos. He warned that running V3 and V4 concurrently during migration effectively doubles the workload, and noted there is no clear legal framework that specifies a risk manager’s liabilities if a protocol fails. He added that the firm chose to walk away even from a $5 million engagement rather than accept those conditions.
Aave Labs CEO Stani Kulechov offered a different account. He said Chaos proposed becoming the sole risk provider and replacing other partners’ tooling, including substituting its own price oracles for Chainlink. Accepting that change would have meant removing LlamaRisk and abandoning Aave’s two-layer economic risk model, Kulechov said, and he stressed Aave’s confidence in Chainlink’s track record and user comfort at scale. Kulechov also indicated Chaos was already considering winding down its risk consultancy services, and that Aave’s offer to double compensation to $5 million had been made.
Kulechov added that Chaos’s departure did not disrupt Aave’s smart contracts, token listings, or network integrations. Aave plans to work closely with LlamaRisk to manage the transition and preserve its two-layer risk approach.
The split comes amid broader governance tensions over funding and revenue allocation between Aave Labs and the Aave DAO. Despite internal disagreements, Aave recently surpassed $1 trillion in cumulative lending volume. Cointelegraph reached out to Chaos Labs for comment.