Aave Ends Partnership with Chaos Labs Over Unsustainable Economics

Aave, one of the largest lending protocols in DeFi, has parted ways with its long-time risk management partner Chaos Labs. The decision marks the latest exit from Aave's core contributor base, which holds significant sway over the protocol.

The termination is attributed to unsustainable economics and disagreements over the management of Aave V4. According to Omer Goldberg, founder of Chaos Labs, the engagement no longer reflected how they believed risk should be managed. He emphasized that Aave's current budget for risk spending was 2% of its revenue in 2025, falling short of banking benchmarks.

Interestingly, Chaos Labs had proposed a $5 million budget to continue their work but would have operated at a loss. The firm also sought to replace Chainlink price oracles with its own product across new deployments, which Aave rejected to avoid vendor lock-in.

LlamaRisk has stepped in to assume risk management duties, assuring full operational continuity for the protocol. Analyst Duo Nine raised questions about Aave's priorities, highlighting the significant value locked on V3 while leadership focused discussions on $10 million in V4 deposits.