Aave is facing one of the deepest internal disruptions in its history. There has been no hack and no disclosed protocol bug at the center of the story. Instead, the pressure is coming from inside the ecosystem, with risk manager Chaos Labs, technical contributor BGD Labs, and governance service provider ACI all stepping away or preparing to do so.
Chaos Labs exits after disputes over fees, exclusivity and V4 risk design
On April 7, Chaos Labs said it was ending its relationship with Aave after three years of work across Aave V2 and V3. The firm said the decision was driven by long-running losses, the departure of major contributors such as BGD Labs and ACI, and a fundamental disagreement with Aave Labs over how risk should be handled as Aave V4 moves forward.
A central point of conflict is the hub-and-spoke architecture proposed for V4. Chaos Labs argued that the design could improve capital efficiency, but would also amplify risk materially. It said an unclear legal liability framework would force a risk team to maintain both V3 and V4 at the same time, sharply increasing the operational burden. Aave Labs responded that smart contracts and network deployments would not be affected, and said LlamaRisk would take on a larger role during the transition.
Aave Labs also revealed that the two sides had gone through several rounds of renewal talks. It supported raising Chaos Labs’ risk management fee to $5 million, but rejected a direct increase to $8 million without additional conditions. Aave Labs also opposed exclusive terms that would have made Chaos Labs the sole risk manager and granted it other privileged positions. According to Aave Labs, the protocol will keep a two-layer risk framework and add a third technical risk management layer led internally.
The dispute was not only about structure and commercial terms. Aave Labs pointed to a March incident involving the Aave CAPO oracle managed by Chaos Labs, where an on-chain configuration error caused wstETH to be undervalued by about 2.85%. That mistake wrongly triggered liquidations on roughly $27 million of healthy positions.
BGD Labs and ACI departures deepen technical and governance strains
The pressure extends beyond risk management. On April 1, BGD Labs, the main technical service provider behind Aave V3, said it would stop all technical contributions. BGD Labs accused Aave Labs of restricting V3 development in order to push an immature V4, and said parameter changes were being used to steer users toward migration.
BGD Labs claimed V3 accounted for 98% of Aave’s code, nearly all of its TVL, and more than $100 million in annual revenue. In its view, V4 development had become increasingly closed off, limiting the role of outside teams. That criticism cuts directly at the collaborative structure Aave had relied on for years.
Governance service provider ACI, led by Marc Zeller, has also said it plans to exit in July, with BGD Labs’ departure serving as the immediate trigger. Zeller accused Aave Labs of carrying out a “slow-motion coup” and said on-chain data showed it controlled 23% of AAVE supply, enough to dominate community proposals.
V4 ambitions now collide with concerns over DAO balance and protocol trust
From the perspective of Aave Labs and founder Stani Kulechov, the push around V4 and the “Aave Will Win” framework is meant to turn a loose network of contributors into a more unified and execution-focused system. The commercial logic is clear: concentrate resources on higher-margin products, tighten control over the brand, shorten decision cycles, and improve value capture for the AAVE token.
The service-provider exodus exposes the cost of that transition. If specialist contributors believe their compensation no longer covers rising legal and operating risk, or that their influence is being reduced inside the DAO, they can leave. Quickly. That leaves Aave dealing with more than a vendor reshuffle; the governance balance that supported the protocol’s growth is being rewritten in public.
For now, LlamaRisk is expected to assume broader risk coverage responsibilities, with Aave Labs offering engineering, analytical and budget support. Aave says V4 will use spokes to isolate markets, introduce new liquidation logic and let governance manage risk parameters with greater precision. Even so, after the back-to-back moves by Chaos Labs, BGD Labs and ACI, scrutiny of Aave’s execution capacity and risk controls has already intensified.