Chaos Labs Works with Major Decentralized Finance Clients including Aave, BENQI, Osmosis, and dYdX
Chaos Labs, the first highly automated economic security system for crypto protocols, today announced that it has raised $20M in seed funding led by Galaxy and PayPal Ventures, with participation from Coinbase, Uniswap, Lightspeed, Bessemer, Hashkey and top angels such as Balaji Srinivasan and Naval Ravikant. Chaos Labs will use the funding to expand its offerings and build out its suite of risk and security products. In its first year of operations, Chaos Labs has partnered with major Decentralized Finance ("DeFi") customers, including Aave, Chainlink, Uniswap, BENQI, and Osmosis, to secure and optimize the protocols against manipulation and black swan market events, while also offering capital optimization recommendations.
Omer Goldberg, Founder & CEO, Chaos Labs (Credit: Sophie Sahara)
Protecting crypto protocols against economic system exploits and insufficient risk parameters has never been more important, and new security paradigms are required. According to The Block, total funds lost in 2022 to DeFi exploits reached $2.05 billion, a 48% increase from 2021 as malicious actors and nation states are using increasingly creative methods to exploit on-chain protocol vulnerabilities. Chaos Labs was founded to solve this, securing protocols against economic vulnerabilities and market manipulation events. The company is the first automated risk management platform for crypto, operating best-in-class security practices including robust agent- and scenario-based simulations. Working with Chaos Labs, teams can optimize user capital efficiency and more quickly adapt to ever-changing crypto markets – helping them stay competitive without compromising on the security of their protocol.
"As the world moves from the opacities of traditional finance to a more open DeFi system, financial risk management must advance accordingly," said Chaos Labs' CEO and Founder, Omer Goldberg. "At Chaos Labs, we believe that every DeFi protocol must regularly conduct robust risk testing to verify and validate that their economic system is secure against hackers and unanticipated volatility. We've built a team of expert security and infrastructure engineers, and we're working to solve for this by bringing world-class security and risk practices in running simulations of millions of economic scenarios on-chain."
Chaos Labs Risk Solution Platform:
Chaos Labs' risk suite can help protect DeFi protocols of all structures from malicious attacks with preventative measures and monitoring tooling.
- Optimize Risk and Capital Efficiency: Chaos Labs arms teams and communities with protocol-specific simulation models to understand the impact of varying parameter settings on protocol capital efficiency and risk. The underlying methodology and inputs are shared for transparency so that the testing process and output results are clearly understood and communicated. Chaos Labs' state-of-the-art scenario simulation engine can recreate specific attack strategies to test and discover their applicability and profitability—as well as suggest risk mitigation tactics that should be implemented in response.
- Streamlined Risk Assessments: Similar to a smart contract audit, but focused on economic vulnerabilities. Developers experimenting with new economic systems and money flows can work with Chaos Labs to analyze how market shifts (e.g., liquidity, oracles, volatility, etc.) may influence or break their protocols' economic design.
- Spend Optimization: DEXs compete rigorously to scale liquidity available to users to attract trading volume. Chaos Labs' simulation engine helps protocol teams strategically set incentive spending to maximize ROI on lower budgets, extending runway through turbulent markets.
Growth & Adoption
Since it was founded in October 2021, Chaos Labs has grown rapidly and won marquee industry clients including Aave, BENQI, Osmosis, and dYdX. The Aave community approved Chaos Labs to engage the protocol for enhanced Aave V3 risk optimization and mitigation. Chaos Labs provided Aave with a first-of-its-kind, public risk parameter recommendation tool—engaging and educating the community on risk-related decisions. Chaos Labs was also awarded an Aave grant for developing a health and liquidation risk analytics dashboard, and more recently, the community voted for Chaos Labs to significantly expand risk analysis and management to Aave V2 markets and help streamline the transition from V2 to V3. The company has also worked with dYdX, creating an asset listing portal to support adding new assets. Additionally, it received a grant from the Osmosis Grants Program to build new incentives optimization models and tools in collaboration with Hathor Nodes. Following the collaboration, Chaos Labs released two public-facing dashboards on incentives program optimization.
"The success of crypto depends upon on-chain risk management and mitigation, and Chaos Labs is the type of software-solution the industry needs," said Mike Giampapa, General Partner at Galaxy Ventures. "We believe Chaos Labs plays a critical role in building standardized practices for protocol safety as more assets move on-chain. We're thrilled with what they've accomplished in their first year and can't wait to see how they drive economic safety and security across the industry."
"As crypto development accelerates and the landscape grows in complexity, so does the range of potential exploits and hacks," said Amman Bhasin, Partner at PayPal Ventures. "Chaos Labs addresses this by arming protocols, investors, and users with a suite of risk management and optimization tools to protect against these vulnerabilities. We're excited to invest in Chaos Labs as it aims to solve one of the most critical risk vectors in crypto and DeFi."