Historical report: April 10, 2026, at 18:05 (UTC+8). Based on reporting and analysis by Jae at PANews.
Aave’s transition toward V4 had become a dispute over who should build, govern and manage risk for the lending protocol. By the report’s publication, BGD Labs had ended its technical contributions and Chaos Labs had announced its departure from risk management. Governance provider Aave Chan Initiative (ACI), led by Marc Zeller, planned to exit in July 2026—not an already-completed departure.
The conflict put two approaches to scaling DeFi in tension: a more coordinated ecosystem led by Aave Labs, and a distributed service-provider model intended to preserve independent expertise and checks on power.
Chaos Labs’ exit: risk concerns and disputed contract terms
On April 7, Chaos Labs announced it would end its work with Aave after three years supporting V2 and V3. PANews described that period as having produced no major bad debt.
Chaos Labs cited sustained financial losses, the departures of other key contributors, and fundamental differences with Aave Labs over risk management as V4 rolled out. It argued that V4’s hub-and-spoke architecture improved capital efficiency but amplified risk, while maintaining both V3 and V4 would double its workload amid unclear legal responsibilities.
Aave Labs offered a different account of the contract negotiations. It said it supported raising Chaos Labs’ risk-management compensation to $5 million, but not directly to $8 million without additional conditions. It also said it opposed three proposed requirements:
- Making Chaos Labs the sole risk manager.
- Replacing Chainlink with a Chaos Labs oracle.
- Making unaudited Chaos Labs vaults the default for all business-to-business integrations.
These were Aave Labs’ descriptions of the negotiations, rather than independently established findings about Chaos Labs’ intentions.
The report also cited a March 2026 incident involving Aave’s CAPO oracle, for which Chaos Labs was responsible. An onchain configuration error undervalued wstETH by approximately 2.85%, triggering about $27 million in liquidations of otherwise healthy positions.
Aave Labs thanked Chaos Labs and said the departure did not affect the protocol’s smart contracts or network deployments. It said LlamaRisk would take on more risk coverage, supported by additional staffing, budget, engineering and analytical resources. Aave Labs also said it would retain a two-layer risk-management model and introduce a third, technical-risk layer under its own leadership.
BGD’s completed departure and ACI’s planned exit
On April 1, BGD Labs announced the end of all its technical contributions to Aave. The V3 development team accused Aave Labs of restricting V3 development, disparaging its value and using parameter changes to push users toward a V4 system that BGD considered insufficiently mature.
BGD said V3 accounted for 98% of Aave’s code, almost all its total value locked and more than $100 million in annual revenue. It also alleged that V4 development excluded outside teams and left BGD without adequate influence or compensation. These claims reflected BGD’s position in the dispute.
ACI’s planned July departure followed BGD’s exit. Zeller accused Aave Labs of conducting a “slow-motion coup.” According to the report, he cited onchain data to allege that Aave Labs controlled 23% of the AAVE token supply, giving large voting blocs an advantage over community proposals.
PANews interpreted these developments as a weakening of the checks and balances that had underpinned Aave’s service-provider model. That is a governance assessment, not evidence that every independent role had already disappeared.
What the V4 narrative promises—and what remains conditional
PANews framed the strategy of Aave Labs and founder Stani Kulechov as an effort to build a more cohesive ecosystem through V4 and the “Aave Will Win” framework. The proposed benefits were faster execution, less fragmented decision-making, coordinated brand ownership and stronger value capture for AAVE.
V4’s hub-and-spoke design introduces isolated risk markets through spokes, new liquidation logic and governance-controlled parameters. The article suggested that a unified liquidity hub could help Aave pursue real-world-asset and institutional-credit use cases. Those were prospective opportunities, not demonstrated adoption outcomes.
The article also discussed the possibility of returning 100% of front-end revenue to the DAO if the relevant proposal were implemented. That remained conditional; it did not establish that AAVE holders had acquired a direct entitlement to income.
The immediate test is operational continuity
The optimistic interpretation was that fewer competing stakeholders could shorten development cycles and simplify V4 execution. The counterargument was that losing experienced contributors during a complex transition could weaken independent oversight and leave gaps in operational knowledge.
PANews highlighted dependence on LlamaRisk as the remaining principal external risk provider, alongside concerns about response capacity and the credibility of governance checks. These were risk assessments, not a report of a new exploit or proof that the protocol had stopped functioning.
At the April 10 reporting date, the central question was whether Aave could gain coordination without losing the independent expertise and accountability that had helped support its growth. The supplied report did not resolve whether the departures would prove a temporary transition cost or a longer-lasting institutional weakness.
