Chaos Labs exits as Aave risk provider over V4 risk control

DeFi lending protocol Aave has ended its partnership with Chaos Labs, its main Aave risk provider for about three years. Chaos Labs said it left after budget and risk-management disagreements tied to Aave’s planned migration to Aave V4. Chaos founder Omer Goldberg called the decision “not made in haste,” noting Aave Labs had increased the budget offer to $5m to keep Chaos. Despite that, Goldberg said the engagement no longer matched Chaos’s view of risk management. He warned that V4 migration could take months or years, requiring both V3 and V4 systems to run simultaneously, effectively doubling operational and legal risk. He also argued there is no clear regulatory framework or legal “safe harbor” for what risk managers owe when a protocol fails. Aave Labs CEO Stani Kulechov disputed Chaos’s framing. Kulechov said Chaos pushed a proposal to become the sole risk manager and use Chaos price oracles, which would have forced Aave to remove its other risk partner, LlamaRisk, and abandon its two-layer economic risk model. Aave also cited users’ familiarity with Chainlink’s services and its track record with Chainlink-based infrastructure. Kulechov added Chaos’s exit has not affected Aave smart contracts, token listings, or network integrations. Aave said it will work closely with LlamaRisk to transition smoothly and maintain its risk model. Separately, Aave reached $1 trillion in cumulative lending volume in late February, and the community has been focused on DeFi interface and trade-risk protections following a March 12 event where a user reportedly lost $50m. Overall, the Aave risk provider change is significant for governance and risk operations, but Aave expects no direct protocol disruption.