Aave’s last key builder exits as V4 rollout stirs conflict

After more than 3 years, Chaos Labs is finally leaving Aave due to disagreements over how to handle risk in the new V4 system. According to a post on the Aave governance forum and social channels, Chaos Labs has been running the Aave engagement at a loss, and moving from V3 to V4 will double their workload and significantly increase risk.

The firm emphasized that the dispute goes beyond financial terms, pointing instead to a “fundamental misalignment” over how risk should be handled as Aave scales.

Chaos Labs leaves Aave because V4 is hard, and risk plans do not align

Chaos Labs has managed risk for the DeFi platform since 2022, but has now decided to step down because the new V4 system is too complex and doesn’t meet its safety standards. The team says leaving is the best way to protect its work and reputation, and that the decision was carefully planned, not sudden or reactive.

Because of Chaos Lab’s role in risk management, Aave’s total value locked (TVL) grew from $5.2 billion to over $26 billion, as users borrowed over $2.5 trillion and liquidations exceeded $2 billion without causing major losses.

Chaos Labs even built risk systems, such as Risk Oracles, that made the protocol more reliable than other DeFi projects. However, there are quite a few pressures that gave the company more reason to cut ties with Aave, starting with the exit of contributors like BGD Labs and ACI, leaving Chaos Labs to handle more tasks than ever before.

Similarly, Aave planned to migrate from V3 to V4, but the migration is too complex, and the workload is too much to handle within the expected timeframe.

Aave even offered to raise Chaos Lab’s budget to $5 million, but the team estimated $8 million instead to manage the same risk for V3, V4, and institutional expansion.

But even with more funding, the resources won’t match the real work needed because Chaos Labs has been operating at a loss for three years. To be specific, the protocol generated $142 million in revenue in 2025, and while banks usually spend 6–10% on risk and compliance, Chaos Labs allocates only 2% of revenue to these functions.

Similarly, the law usually holds DeFi risk managers responsible for any mistakes because they lack clear legal protections. On top of that, migrating from V3 to V4 doubles the workload and can take months or even years to complete. What’s more, V3 has to remain live until V4 is complete, so Chaos Labs would have to manage both systems alone and on a limited budget. 

Beyond money and workload, Chaos Labs said it doesn’t agree with Aave’s risk management requirements because the new V4 cannot guarantee the same level of safety under the current plan.

Still, Chaos Labs is concerned about the DeFi platform’s reputation with large investors, who could lose confidence in the team if it leaves without proper risk alignment during the V4 launch. 

Leaving indicates that Chaos Labs is not willing to compromise its risk management standards for any reason, so Aave must now find new ways to safely navigate the V4 transition while maintaining investor confidence. 

Governance fights and people leaving make Aave riskier

Before Chaos Labs decided to exit Aave, key contributors like BGD Labs and Aave-Chan Initiative had already left. These teams held years of irreplaceable experience and knowledge that kept loans safe and the protocol stable.

Similarly, there have been disagreements between contributors, delegates, and Aave Labs over fee distribution, tokenholder rights, and major development funding proposals. 

The “Aave Will Win” proposal, for example, needed $51 million for development and suggested moving Aave Labs into a DAO-controlled subsidiary. It passed by a whisker, showing just how much DAO members disagree.

Budget disagreements also played a key role, like when the protocol offered Chaos Labs $5 million, but the team rejected it because it wasn’t enough to sustain operations and still keep the company profitable.

Aave’s founder, Stani Kulechov, posted on social media, thanking Chaos Labs for their contributions but disagreeing with some of the claims. He said the protocol will continue the V4 movement in a controlled, security-first manner, even though the exit of major contributors poses an obvious challenge for the public.

Aave’s leadership, DAO delegates, and remaining contributors must carefully plan their next moves because the slightest mistakes could have significant effects on protocol stability and user trust. 

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