Chaos Labs, the primary risk service provider for DeFi lending giant Aave, announced Monday that it has terminated its three-year partnership, effective immediately. The split stems from fundamental disagreements over budget and the scope of risk control authority.
Goldberg: Workload Doubled, Legal Liability Unclear
Chaos Labs founder Omer Goldberg stated on X that the decision was “not made lightly.” He revealed that Aave Labs had offered to increase the budget to $5 million to retain the team, but Chaos chose to decline. “When things go well, this job is invisible; when they go wrong, liability has no escape,” Goldberg wrote. He pointed to a jurisdiction without regulatory framework, safe harbor provisions, or case law to determine who bears responsibility when a protocol fails. The departure of several Aave core contributors has increased Chaos’s workload, and the expansion of Aave V4 brought additional operational and legal risks. The V3-to-V4 migration requires both systems to run simultaneously, effectively doubling the work. Under these circumstances, Chaos walked away from a $5 million contract.
Kulechov: Chaos Sought Monopoly, Wanted to Replace Chainlink
Aave Labs CEO Stani Kulechov offered a starkly different account. He claimed Chaos demanded to be Aave’s sole risk manager and to replace Chainlink with its own price oracle, while forcing out another risk partner, LlamaRisk. This would mean abandoning Aave’s current two-tier economic risk model, which Kulechov said Aave was unwilling to do. He noted that Aave users are comfortable with Chainlink’s service, which has a proven track record at scale, making Chaos’s proprietary oracle unfeasible. Kulechov added that Chaos had already been evaluating a gradual retreat from risk advisory, and the $5 million offer was intended to retain them. He emphasized that Chaos’s exit caused no disruptions to Aave’s protocol, smart contracts, token listings, or network integrations.
TVL Quintupled Under Chaos, but Core Contributors Keep Leaving
During Chaos Labs’ tenure, Aave’s TVL surged approximately fivefold from $5 billion to $26 billion. But its departure is not an isolated event — it follows ACI (Aave Chan Initiative) and BGD Labs as the latest wave of core contributor exits. Risk management has been a sensitive topic lately: On March 12, a user lost $50 million while interacting with Aave’s interface. A week later, Aave announced Aave Shield, a protection mechanism to block high-risk transactions. Despite internal turmoil, Aave achieved a milestone in late February by surpassing $1 trillion in cumulative borrowing — a first in DeFi history, with Chaos Labs as a behind-the-scenes contributor. Going forward, LlamaRisk and internal teams will take over risk management, maintaining the dual-layer risk control structure.