Chaos Labs exits as Aave risk manager amid governance dispute

Aave’s crypto lending protocol is operating without a dedicated risk manager after Chaos Labs announced its exit, a move that removes the firm responsible for pricing loans and managing key risk settings across Aave V2 and V3 markets. The change comes as Aave’s total value locked (TVL) is reported at more than $50 billion and the protocol is in the middle of its V4 migration.

Chaos Labs exits amid governance and compensation dispute

Chaos Labs, which served as Aave’s primary risk manager since November 2022, cited unprofitability, contributor attrition, and a disagreement with Aave Labs over risk methodology for the V4 migration. The departure follows earlier exits by BGD Labs and the Aave Chan Initiative, leaving Aave with no remaining technical contributors from its V3 build team at the same time V4 requires dual-stack oversight.

The dispute is described as centered on compensation structure and risk philosophy. Aave Labs proposed increasing Chaos Labs’ budget to $5 million annually, which is characterized as roughly 3.5% of Aave’s $142 million in 2025 revenue. Chaos Labs said this was insufficient given three years of operating losses and the expanded workload tied to V4. The article notes that banks typically allocate 6% to 10% of revenue to risk and compliance functions.

What Chaos Labs managed across Aave V2 and V3

Chaos Labs managed core protocol risk functions across Aave V2 and V3, including:

• Collateral factors
• Liquidation thresholds
• Interest rate models

The article states that Chaos Labs priced every loan initiated on Aave from November 2022 through the present across more than a dozen networks. It also reports that founder Omer Goldberg said Chaos achieved zero material bad debt during that period.

With no assigned owner for these functions, the article describes a structural protocol-risk vacuum at a time when Aave is processing nearly $1 trillion in cumulative loans.

V4 migration complexity increases the stakes

Aave V4 launched one week before Chaos Labs’ exit announcement. The article describes V4 as introducing a hub-and-spoke liquidity architecture that requires new infrastructure, tooling, and simulation models. It also notes that V3 support is expected to continue until migration is complete, which Goldberg said historically takes years rather than months.

Contributor attrition compresses institutional knowledge

Chaos Labs is described as the third major Aave contributor to exit in 2025, after BGD Labs and the Aave Chan Initiative. The article frames this as compressing the remaining institutional knowledge base inside the DAO during a critical transition period.

What the DAO is expected to decide next

The article says the key near-term focus is a governance forum vote on interim risk mandate appointments—specifically whether a credentialed replacement is named before Aave’s first V4 parameter adjustment is required. It adds that a V4 liquidation event without a designated risk manager in place would represent a measurable failure of the transition framework.

Responses from Aave leadership

The article includes a statement from Aave Labs and notes pushback from Aave Labs CEO Stani Kulechov. Kulechov argued that V4 is additive and that V3 migration does not carry a forced deadline. The article says this does not address who manages V3 risk parameters while the replacement search runs, or who sets V4’s initial collateral factors when major markets go live.

It also includes a statement thanking Chaos Labs for its work, describing Chaos Labs as a valuable partner to the Aave DAO whose contributions helped Aave grow and mature.