Chaos Labs, the risk management company that priced all loans on the DeFi protocol since November 2022, has ended an engagement with Aave.
Notably, during the tenure of the engagement, Aave’s total value locked (TVL) skyrocketed from $5.2 billion to surpass $26 billion.
But why is Chao Labs done with Aave? Well, after processing liquidations worth over $2 billion without bad debt, the risk firm has cited unsuitable budget, misalignment in risk management approaches, and reservations about adopting Aave V4’s new architecture without sufficient resourcing.
A post shared by Chaos Labs’ founder Omer Goldenberg reads:
“Money solves many problems, but not all of them. The deeper issue is a fundamental misalignment on how risk should be managed at Aave. The more we discussed the path forward, the clearer that gap became.”
The last remaining technical contributor walks out
Chaos Labs isn’t in this alone. The engineering team that built Aave V3, BGD Labs, ended its contribution on April 1. That came after the Aave Chan Initiative exited in March over an interface fees dispute.
Now, Chaos Labs is out. And as their exit statement indicates, “People don’t walk away from something like that without good reason.”
The risk firm has attributed its exit to key contributors leaving Aave and soaring operational threats. It added that V4 increased the burden (on an architecture they never designed), leading to engagement losses for three consecutive years.
According to Chaos Labs, it would cost $8 million yearly to manage V3 and V4 properly. That’s above the proposed budget increase to $5 million, while still below the funding that banks allocate for compliance and risk by 6- 10%.
Not the time to lose your core team
These departures are happening as the DeFi space deteriorates, with the lending market contracting substantially. The latest Artemis data showed that deposits on top crypto lending protocols have declined from $125 billion to $79.6 billion since October 2025 – a 36% dip.
Aave accounts for the largest share of the slump, losing $27.6 billion in that timeframe – more than Spark, Fluid, Compound, and Euler combined.
That’s a humbling backdrop for a platform known for safety and reliability.
What’s next for Aave
Where does the lending protocol stand after losing all key contributors?
Aave Labs founder Stani Kulechov has highlighted Chaos’s contribution to the protocol’s maturity over the years, while reframing their exit as a natural part of Aave’s evolution.
On how they’ll operate after losing “one of their two risk managers,” Kulechov said:
“For the immediate future, Aave Labs will work closely with LlamaRick to ensure a smooth transition and uninterrupted risk coverage for the protocol.”
Nonetheless, Chaos Lab’s closing statement is hard to ignore: “Continuity of the brand is not the same thing as continuity of system.”
Aave’s name remains the same. But the infrastructure, team, and institutional expertise that made it mean something have left.
The protocol’s native token, AAVE, has lost nearly 5% in the past day to $92.23.
