Chaos Labs exits Aave risk provider role after three years, a decision the DeFi risk manager states was “not made in haste” and stems from fundamental disagreements over risk management philosophy and the complexities introduced by Aave’s planned V4 migration. This significant development, revealed on Tuesday, April 7, 2026, marks a pivotal moment for the leading decentralized lending protocol.
Chaos Labs founder Omer Goldberg publicly addressed the departure on X, highlighting a budget dispute and increasing misalignment regarding how Aave’s risk should be managed. Goldberg noted that while Aave Labs supported increasing their budget to $5 million, the core issue was a divergence in approach, particularly concerning the expanded functionality and associated risks of Aave V4. He emphasized the operational and legal burdens that would fall on Chaos Labs during the transition period, stating, “The workload during the transition doesn’t halve. It doubles.”
Chaos Labs Exits Aave Risk Provider: Divergent Views
Aave Labs CEO Stani Kulechov presented a slightly different perspective, clarifying that the departure was not on bad terms but stemmed from Chaos Labs’ proposal to become the sole risk provider. This would have necessitated removing other partners, such as LlamaRisk, and replacing Chainlink’s established price oracles with Chaos-built alternatives. Kulechov stated that Aave was unwilling to compromise its two-layer economic risk model or its long-standing trust in Chainlink’s services, which its users are “currently more comfortable with at scale.”
“We are walking away from a $5 million engagement because the engagement no longer reflects how we believe risk should be managed.”
Chaos Labs played a crucial role in Aave’s infrastructure, managing risk and pricing loans across Aave V2 and V3 markets since November 2022, a period during which Aave’s total value locked surged fivefold to $26 billion. The importance of robust risk management has been a recent focal point for Aave, especially after a user experienced a $50 million loss in a trade interacting with Aave’s interface in March. In response, Aave announced the introduction of an “Aave Shield” feature designed to deter high-risk trades.
Goldberg further elaborated on the legal ambiguities surrounding risk management in the DeFi space. “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,” he explained. This uncertainty, coupled with the increased complexity of Aave V4, contributed significantly to Chaos Labs’ decision to step back.
Impact on Aave’s Risk Management Strategy
Despite the departure, Kulechov assured the community that Chaos Labs’ exit has not disrupted the Aave protocol, its smart contracts, token listings, or network integrations. Moving forward, Aave will collaborate closely with LlamaRisk to ensure a seamless transition and uphold its two-layer economic risk model. This collaborative approach aims to maintain the stability and security of the protocol amidst these changes.
This development unfolds against a backdrop of broader internal discussions within the Aave community, including debates over funding and revenue control between Aave Labs and its decentralized autonomous organization. Despite these governance challenges, Aave achieved a significant milestone in late February, crossing the $1 trillion mark in cumulative lending volume, a first for the DeFi industry. The continued evolution of its risk management framework will be critical as Aave navigates these internal and external complexities.
