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Aave risk manager Chaos Labs just announced its departure, raising renewed questions for the embattled lending market.
What's the Scoop?
- Stepping Down: Chaos Labs, Aave’s primary risk management group since 2022, announced it will step down and terminate its engagement with Aave, ending a more than three-year streak of oversight with "zero material bad debt" for depositors.
- Misaligned Priorities: The risk manager cited a “fundamental misalignment” with Aave on how risk should be managed, arguing the protocol is underinvesting in risk relative to its scale. While Aave Labs proposed upping Chaos Labs' budget to $5M, the firm claims it would still operate at a loss at that figure, and that the recently deployed Aave V4 will increase the scope of risk oversight..
- Centralization Concerns: Earlier this year, key Aave community stewards BDG Labs and Aave Chan Initiative announced their exit from the DAO, citing risks related to centralization concerns.
Chaos Labs Is Leaving Aave
Since November 2022, Chaos Labs has priced every loan initiated on Aave and managed risk across all Aave V2 and V3 markets and networks, with zero material bad debt. During that time, Aave grew from $5.2 billion to more than $26 billion in TVL, facilitated over $2.5 trillion in cumulative deposit volume, and processed over $2 billion in liquidations. Today, we are stepping down from that mandate and seeking to proactively terminate our engagement. This decision was not made in haste. We…
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