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Chaos Labs, one of the longest-standing risk managers for the decentralized lending giant Aave, is stepping down after nearly three years, marking a pivotal shift for the protocol as it prepares for its next major upgrade.
The risk management firm announced on April 6, 2026 that it is proactively terminating its engagement with Aave, citing what it described as a ‘fundamental misalignment’ over how risk should be managed at the scale of one of decentralized finance’s largest platforms. The departure comes despite Aave offering to double Chaos Labs’ compensation to roughly $5 million annually in an effort to retain the firm.
— Omer Goldberg (@omeragoldberg) April 6, 2026
Chaos Labs has played a central role in Aave’s growth since November 2022, when it began pricing every loan initiated on the protocol and managing risk across all Aave V2 and V3 markets. During that period, Aave’s total value locked climbed from roughly $5.2 billion to more than $26 billion, while the protocol processed more than $2.5 trillion in deposits and over $2 billion in liquidations, according to the firm.
The exit adds to a growing list of departures among Aave’s core contributors, raising questions about operational continuity as the protocol transitions to its next-generation architecture.
Chaos Labs’ withdrawal follows the recent exits of BGD Labs and the Aave-Chan Initiative (ACI), two other key contributors to the protocol’s governance, engineering, and operations. The departures have left fewer experienced operators overseeing the protocol just as Aave rolls out its V4 architecture, which introduces new risk configurations and market structures.
BGD Labs, which helped engineer Aave’s V3 infrastructure, announced plans to step back in early April, while ACI, a governance and growth contributor, said in March that it would wind down operations. Chaos Labs’ exit marks the third major contributor departure within weeks, intensifying concerns about institutional knowledge leaving the ecosystem.
Chaos Labs said the departure of these teams materially increased the operational burden, particularly as Aave prepares to run both V3 and V4 simultaneously during migration. The firm warned that managing two live systems could effectively double workload during the transition.
At the center of the dispute is Aave V4, a new lending architecture that introduces isolated markets, new liquidation logic, and more interdependent configurations across markets.
Chaos Labs said the shift represents a ‘completely new’ protocol that would require rebuilding risk infrastructure, including new simulations, tooling, and operational frameworks. The firm argued that these changes expanded the scope of risk management without corresponding increases in resources.
The company also said it had operated the Aave engagement at a loss for three years and projected that even the proposed $5 million budget would leave the mandate unprofitable. Chaos Labs estimated that roughly $8 million annually would be required to support both V3 and V4 risk management at the level expected for a protocol managing tens of billions of dollars.
Beyond economics, Chaos Labs cited legal and operational risks, noting that managing risk for large DeFi protocols carries undefined liability and cybersecurity exposure, particularly as institutional adoption increases.
Aave founder Stani Kulechov responded by thanking Chaos Labs for its contributions while emphasizing that the protocol would continue operating without disruption.
We respect the decision of Chaos Labs to step down as one of the two risk managers for the Aave DAO.
We want to thank Chaos Labs for their work over the years. They have been a valuable partner to the Aave DAO, and their contributions have helped Aave grow and mature.
There is…
— Stani (@StaniKulechov) April 6, 2026
Aave said it would maintain its two-layer risk model and continue working with LlamaRisk, which already serves as a risk contributor. The company also said it would expand LlamaRisk’s role and provide additional engineering and analytical resources to ensure continuity.
Kulechov also revealed that discussions with Chaos Labs included proposals that Aave ultimately rejected, including making Chaos Labs the sole risk provider and replacing existing oracle infrastructure with Chaos Labs’ alternatives. Aave said it prefers maintaining multiple risk providers to avoid vendor lock-in and preserve redundancy.
Aave also disputed some of Chaos Labs’ concerns about V4, stating that the architecture introduces more granular controls and isolated risk markets designed to improve resilience.
The split underscores broader governance tensions within the Aave ecosystem. The protocol has grown into one of DeFi’s largest financial infrastructures, with tens of billions in deposits and increasing institutional interest.
That growth has made risk management central to its strategy, particularly as traditional financial firms explore on-chain lending opportunities. The departure of multiple core contributors during this transition has heightened scrutiny around governance and operational resilience.
Also, the departure marks one of the most significant operational shifts for Aave in recent years. As the protocol transitions to V4 and navigates contributor turnover, the industry will closely watch whether Aave can maintain its long-standing reputation for reliability – a factor that has helped it dominate DeFi lending through multiple market cycles.
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