Headline: Aave token tumbles to near two‑year low after Chaos Labs quits as DAO risk manager
Aave’s native token AAVE slid to a near two‑year low on Tuesday as governance friction and the fallout from the protocol’s new V4 rollout coincided with the surprise exit of a key risk management partner. The Ethereum‑based token hit $86.15 earlier in the day — its weakest level since July 2024 — and has since recovered slightly to about $89.12. That leaves AAVE down roughly 17% over the past month and more than 86% from its 2021 peak of $661.69. Much of the recent weakness came in the last 24 hours, when the token dropped over 6% after Chaos Labs announced it was stepping away.
Chaos Labs — which has been pricing every loan on Aave and managing risk across V2 and V3 markets since November 2022 — said in a post by founder Omer Goldberg on X that it was “seeking to proactively terminate our engagement.” Goldberg highlighted the decision was “not made in haste,” citing the departure of other core contributors, a substantially expanded risk scope following the V4 launch, and operational losses tied to the engagement. He added that Chaos Labs even declined an offer that would have nearly doubled its annual fee to $5 million.
With Chaos gone, LlamaRisk becomes the Aave DAO’s lone risk manager for now. Aave founder and CEO Stani Kulechov said LlamaRisk already contributes to the DAO and has strong familiarity with the protocol, and that Aave Labs will support an increase in LlamaRisk’s budget and provide engineering and analytical help to ensure a smooth transition and “uninterrupted risk coverage.”
The departure amplifies tensions inside the Aave ecosystem. Chaos’s exit follows several recent pullouts: in February, development shop BGD Labs left, citing a shift in alignment as Aave Labs assumed a more central role, and ACI departed shortly after, saying independent service providers had no clear role where the biggest budget recipient held significant undisclosed voting power.
Background and broader context
- Aave remains the largest DeFi lending protocol, with more than $24 billion in total value locked, according to DeFiLlama.
- The protocol launched an upgraded V4 last week, introducing new borrowing/lending features and a “hub-and-spoke” liquidity model that consolidates liquidity — a move that reportedly expanded risk responsibilities for third‑party contributors.
- Despite the V4 debut, V3 markets are still far more active as users and integrators acclimate to the new version.
Operational risks and user behavior
The protocol has also seen its share of high‑profile user losses: one trader recently ignored a slippage warning when attempting to swap roughly $50 million in stablecoins for AAVE and ended up receiving only $36,100. On the user metric front, Aave’s active users have nearly doubled over the past six months, peaking at about 155,000 in February, underscoring continued demand even amid governance and operational frictions.
What this means
Chaos Labs’ exit consolidates risk responsibility with LlamaRisk and increases reliance on Aave Labs’ internal resources. For the token, the move has already been priced in as short‑term downside; for the protocol, it raises questions about the DAO’s ability to retain—and adequately compensate—independent risk contributors as Aave scales and its governance structure evolves. Market participants will be watching whether LlamaRisk (backed by Aave Labs support) can fill the gap without disrupting markets, and whether further departures or governance disputes emerge as V4 usage ramps up.
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