After three years as Aave’s primary risk service provider, Chaos Labs has ended its partnership with the decentralized lending protocol, a decision both sides describe as stemming from fundamental disagreements over risk management strategy and governance.
Chaos founder Omer Goldberg announced the split on X, stating the decision was deliberate and made in good faith. While acknowledging that Aave Labs had countered with an increased budget proposal of $5 million to retain the firm, Goldberg explained that the core issue was a misalignment on how risk should be governed within the protocol.
Source: Omer Goldberg
Diverging Visions on Protocol Risk Management
Goldberg detailed that the departure followed an increasing operational burden and divergent philosophies. He pointed to the departure of several Aave contributors, which increased Chaos’s workload, and the upcoming launch of Aave V4, which he argued introduces significant new operational and legal risks that would fall under Chaos’s purview during a prolonged transition period.
“While Aave Labs is optimistic about a swift migration to V4, history suggests these transitions take months and even years,” Goldberg wrote. “Until V4 fully absorbs V3’s markets and liquidity, both systems need to be operated and managed simultaneously. The workload during the transition doesn’t halve. It doubles.”
He also highlighted the existential liability risk for a risk manager in decentralized finance. “There is no regulatory framework, no safe harbor, and no settled law that answers the question of what a risk manager or curator owes when a protocol fails,” Goldberg stated, adding that this lack of clarity ultimately made the $5 million engagement untenable. “If things work, the work is invisible. If things break, the blame is not.”
Aave’s Account: The Push for a Sole Provider
Aave Labs CEO Stani Kulechov provided a differing narrative, stating that Chaos’s departure was not acrimonious but resulted from a proposal Chaos put forward that Aave could not accept. According to Kulechov, Chaos sought to become the protocol’s sole risk service provider, which would have necessitated removing its other key partner, LlamaRisk, and abandoning Aave’s established “two-layer economic risk model.”
Furthermore, Kulechov said Chaos requested that Aave integrate its proprietary price oracles in place of Chainlink, a change Aave rejected due to its “track record” with Chainlink and user comfort with the existing system at scale.
Kulechov noted that Aave had offered to double the existing payment to the proposed $5 million figure to keep Chaos on board. He also suggested that Chaos was already contemplating scaling back its consultancy services, stating the firm was “exploring winding down its risk consultancy services.”
Source: LlamaRisk
Kulechov confirmed that Chaos’s exit has not disrupted Aave’s core operations, including its smart contracts, token listings, or network integrations. Moving forward, Aave will collaborate directly with LlamaRisk to manage the transition and maintain its dual-risk-provider framework.
Context: Risk in the Spotlight and Internal Tensions
The split occurs against a backdrop where protocol risk has been a pressing community concern. In March, a user lost approximately $50 million in a single trade while interacting with Aave’s interface, an incident that prompted Aave to announce the development of an “Aave Shield” feature designed to deter high-risk activities.
This internal rift over risk management also coincides with a broader, ongoing debate within the Aave ecosystem about the appropriate revenue share and operational control between the decentralized autonomous organization (DAO) and the for-profit Aave Labs entity. Despite these internal governance challenges, Aave recently surpassed $1 trillion in cumulative lending volume, a first for any DeFi protocol, and maintains a Total Value Locked (TVL) of around $26 billion—a figure that grew roughly fivefold during Chaos’s tenure supporting V2 and V3 markets.
The departure of a major technical partner like Chaos Labs underscores the complex interplay between decentralized governance, technical risk management, and commercial realities in leading DeFi protocols. Both parties maintain their positions were principled, leaving Aave to navigate its next phase of risk management with its existing partner ecosystem while managing a major version upgrade.
