Chaos Labs is ending its nearly three-year tenure as a core risk service provider for the Aave protocol. The firm cited a fundamental misalignment in risk priorities as Aave transitions to its V4 lending protocol. Chaos Labs argues that the new architecture, broader scope, and increased legal and operational demands of V4 necessitate new infrastructure and tooling that differ from current risk management strategies.
The company also stated that the economics of the engagement were no longer viable. Chaos Labs reported running the Aave contract at a loss for the past three years, and even a proposed increase to $5 million would not address negative margins. They noted their budget was approximately 2% of Aave's reported $142 million revenue in 2025, significantly lower than typical bank allocations for risk and compliance.
Chaos Labs has established itself as a key infrastructure firm in DeFi risk, offering services like risk intelligence, simulations, parameter tuning, and real-time monitoring. Their departure occurs as Aave faces broader governance and contributor challenges related to the V4 transition, with Chaos Labs noting it is the last technical contributor from the original V3 team to depart.