The rise of DeFi has opened the door to a new era of financial innovation, offering users worldwide access to lending, borrowing, and trading without intermediaries. Yet, as exciting as this may sound, DeFi is not without its risks. With billions of dollars locked in DeFi protocols, concerns about market volatility, mismanagement, and security vulnerabilities are becoming more pressing. Traditional finance investors, in particular, are wary of these risks, especially compared to the stringent risk management systems developed in centralized finance.

Chaos Labs addresses these challenges head-on by offering a fully automated on-chain economic security system. Its platform provides real-time data, risk alerts, and automated updates to critical parameters like collateral requirements and liquidation thresholds. This reduces reliance on human decision-making and minimizes delays, ensuring DeFi protocols can quickly adapt to market changes.

What is Chaos Labs?

Chaos Labs is a decentralized cloud platform designed to optimize risk management and capital efficiency for DeFi protocols. It offers a suite of tools, including real-time data oracles, risk alerts, and automated updates to critical protocol parameters. By running agent-based simulations on mainnet forks, Chaos Labs provides a realistic testing environment that ensures security and resilience. With a focus on streamlining operations and reducing human error, the platform helps developers and teams build robust, secure protocols. Currently active on Ethereum, Chaos Labs plans to expand its services to other blockchains such as Terra, NEAR, and Polygon.

The Mission and Vision of Chaos Labs

Chaos Labs’ mission is to enhance the global crypto GDP by developing top-tier infrastructure, tools, and security solutions. Their goal is to build trust and transparency in the future financial markets, allowing DeFi to become the backbone of a 24/7 global financial ecosystem.

Chaos Labs is committed to creating resilient systems that can withstand market volatility and attempts at economic manipulation. By partnering with industry leaders, they ensure that DeFi builders can innovate confidently, knowing their protocols are safeguarded against risks, fostering mainstream adoption and growth.

Use Cases of Chaos Labs Trade

Chaos Labs provides an all-encompassing platform to help DeFi protocols safeguard operations, optimize risk management, and enhance capital efficiency. Using state-of-the-art simulations, risk assessments, and budget optimization strategies, Chaos Labs empowers teams to make informed decisions in the rapidly evolving DeFi space. Below are the key use cases of Chaos Labs’ risk solution platform:

• Optimize Risk and Capital Efficiency: Chaos Labs equips DeFi teams with protocol-specific simulation models to understand how different parameter settings impact risk and capital efficiency. These models provide transparency by sharing the underlying methodology and inputs, ensuring that the community easily understands the testing process and results. The platform’s advanced scenario simulation engine can recreate attack strategies, enabling teams to assess their effectiveness and implement risk mitigation tactics where necessary
• Streamlined Risk Assessments: Chaos Labs conducts economic vulnerability assessments similar to smart contract audits but focused on financial risks. Developers building new economic systems can work with Chaos Labs to simulate market conditions, such as liquidity fluctuations or price volatility, to evaluate how these changes might affect their protocol’s economic design. This helps DeFi protocols adapt to evolving market scenarios and maintain stability.
• Spend Optimization: Decentralized exchanges (DEXs) are constantly competing to scale liquidity and attract trading volume. Chaos Labs’ simulation engine helps protocol teams optimize their incentive spending, allowing them to maximize return on investment (ROI) with smaller budgets. This is especially important in volatile markets, as it enables protocols to extend their financial runway while remaining competitive in liquidity provisioning and user engagement.

Technology Behind Chaos Labs

Mainnet Fork Simulations

Chaos Labs allows teams to run agent-based and scenario-based simulations on mainnet forks. These simulations replicate real-world conditions, enabling protocols to test various attack strategies, parameter changes, and market scenarios without affecting live environments. This testing process helps identify vulnerabilities and optimize risk management strategies, ensuring protocols are resilient to market shifts and economic manipulations.

Real-Time Data Oracles

Chaos Labs utilizes real-time data oracles to provide up-to-date information on market conditions. This real-time data is critical for adjusting key protocol parameters such as collateral requirements, liquidation thresholds, and interest rates. By automating updates based on real-time data, Chaos Labs reduces the risk of human error and ensures protocols can swiftly respond to market volatility.

Scenario Simulation Engine

The scenario simulation engine is one of Chaos Labs’ most powerful tools. It enables teams to recreate specific attack vectors and test their applicability and profitability. This engine helps protocols identify potential risks and implement the necessary preventive measures before attacks occur. By simulating both external threats and internal parameter adjustments, protocols can optimize for security and capital efficiency.

Cloud-Based Infrastructure

Chaos Labs operates on a cloud platform, providing teams with scalable, stable infrastructure for their simulation needs. This infrastructure allows protocols to accelerate development and testing without compromising security or performance. The cloud-based architecture also supports rapid iteration, enabling teams to test and refine their protocols as market conditions evolve quickly.

With these technologies, Chaos Labs ensures that DeFi protocols are secure and efficient, enabling them to grow and adapt in the fast-paced world of decentralized finance.

Chaos Labs Product

Chaos Labs’ Edge Oracle Network

Edge Oracle Network is Chaos Labs’ flagship product, fundamentally transforming the oracle landscape by combining risk management and data accuracy into one robust system. It serves as more than just a price feed for decentralized finance (DeFi) platforms; it is a context-aware, intelligent oracle solution that anticipates and mitigates risks in real time. The Edge protocol is particularly well-suited for the modern DeFi ecosystem, where price inaccuracies can lead to devastating consequences, especially in volatile markets.

Edge: The Heart of Risk-Aware Oracles

The central innovation of Edge lies in its integration of risk management directly into the oracle’s architecture. Traditional oracles, known as Messenger Oracles, simply relay data from off-chain sources to on-chain smart contracts. However, these oracles are blind to the broader market dynamics that influence asset prices and liquidity. Edge breaks this mold by becoming an integral part of risk assessment and mitigation, understanding not only prices but also the market context and potential manipulation threats. Here are the key features of the Edge Oracle:

• Handling Extreme Market Conditions: One key feature of the Edge Oracle is its ability to deliver accurate price data during extreme market conditions—such as black swan events—where traditional oracles often fail. These failures can lead to insolvencies and protocol breaches, as with Compound’s Oracle manipulation incident, which saw millions lost due to a single price feed’s vulnerability. In contrast, Edge ensures redundancy across multiple data sources, employing price medianization and anomaly detection algorithms that secure the protocol against manipulation attempts.
• Cross-Chain Intelligence: Another groundbreaking aspect of Edge is its cross-chain intelligence. As DeFi becomes increasingly fragmented across different layer-1 (L1) and layer-2 (L2) blockchains, as well as novel protocols like liquidity staking tokens (LSTs), Edge aggregates data from these multiple sources to ensure manipulation-resistant pricing. This is essential for the functioning of leveraged markets, where even the slightest inaccuracy can become a vector for exploitation.
• Low-latency, High-security Design: Moreover, Edge features a low-latency, high-security design. This makes it ideal for high-frequency trading and derivative markets, where speed and accuracy are critical. Unlike older systems that burden developers with creating their own risk models, Edge’s native risk management tools free application developers to focus on product innovation. The intelligent design of the Edge Oracle is tailor-made for the high-speed demands of DeFi 2.0 applications.
• Decentralization & Node Operators: Edge’s decentralized nature is further reinforced by its expanding network of node operators, including key industry players like Blockdaemon and Nethermind. These operators ensure the network’s reliability and security by validating transactions and preventing data manipulation. As Chaos Labs continues to decentralize the Edge Oracle Network, including additional node operators will bolster the system’s security and resilience, creating a more robust foundation for the DeFi ecosystem.

Dashboard: Complete Transparency and Real-Time Analytics

Chaos Labs’ dashboard is another essential feature, providing users with in-depth insights and real-time monitoring of their DeFi applications. Designed for transparency and ease of use, the dashboard delivers comprehensive views of both price data and risk alerts, enabling users to make informed decisions without digging into complex data streams. Here are the key components of the dashboard:

• Client Risk Portal: A key dashboard component is the Client Risk Portal, which allows developers and users to understand their protocol’s risk exposure. Through this portal, users can access insights into individual accounts and see how specific market conditions may affect their holdings or liquidity positions. This feature is particularly valuable for protocol managers who need to maintain a pulse on systemic risks while avoiding the capital inefficiencies from over-conservative risk parameters.
• Price Oracle Portal: The Price Oracle Portal also provides real-time crypto asset data powered by the Edge Oracle. This portal not only shows current prices but also offers insights into how the Edge protocol’s risk engines are managing their integrity. By combining price data with risk assessments, the Price Oracle Portal offers a holistic view of market trends and potential threats, all within a user-friendly interface.
• Streamlined Monitoring For Developers: For protocol operators and developers, the dashboard becomes an indispensable tool for maintaining oversight, ensuring that risk is managed intelligently and efficiently across their DeFi applications. This streamlined monitoring helps them avoid catastrophic failures, particularly during periods of high market volatility, while maximizing the capital efficiency of their platforms.

Incentives: Fueling Sustainable Growth with Smart Programs

Chaos Labs’ incentives program is specifically designed to drive long-term, sustainable growth for DeFi protocols through carefully crafted liquidity incentives, sybil detection, and real-time monitoring. By creating custom incentive structures tailored to the goals of each platform, Chaos Labs helps DeFi projects achieve higher user engagement and retention rates while preventing exploitative behaviors. Here are its stand-out features:

• Incentive Portals: One of the standout features of this program is the Incentive Portals, which are designed to provide liquidity providers (LPs) with real-time insights into how incentive changes impact their yield. This level of transparency is crucial for LPs, who need to understand the effects of protocol changes on their positions to make informed decisions about where to allocate their assets. Through these portals, LPs can gauge whether their current strategies align with the protocol’s evolving incentive schemes, allowing for dynamic participation in liquidity pools.
• Sybil Detection: Additionally, Chaos Labs deploys advanced Sybil detection to prevent exploiters from gaming the system. Sybil attacks—where multiple fake identities are used to abuse reward systems—are a significant issue in DeFi. Chaos Labs addresses this by using sophisticated algorithms to detect and flag suspicious behavior. This ensures that rewards are distributed fairly among genuine participants, thereby preserving the integrity of the incentive program.
• Sustainable Growth Focus: The combination of tailored incentive design, transparent portals for LPs, and robust Sybil detection mechanisms allows protocols using Chaos Labs’ system to grow in a sustainable, secure manner. Rather than inflating liquidity through short-term incentives, Chaos Labs focuses on creating lasting engagement that benefits the long-term health of the DeFi ecosystem.

Chaos Labs Team

A team of experts with deep experience in security, infrastructure, and financial technology drives Chaos Labs. The company’s headquarters in New York City and Tel Aviv bridges traditional financial industry insights with cutting-edge DeFi innovation.

Omer Goldberg – Founder & CEO

Omer leads Chaos Labs with a visionary approach. He leverages his extensive background in security and financial infrastructure to build solutions that address key challenges in decentralized finance, including price manipulation and risk management.

Yonatan Hayun – Co-Founder & CTO

As Chief Technology Officer, Yonatan directs the company’s technological strategy, ensuring that the Edge Oracle Network and other core technologies remain secure, scalable, and innovative for the evolving DeFi space.

Ben O’Neill – VP, Business Operations

Ben oversees business operations and growth, focusing on strategic partnerships and ensuring the smooth execution of Chaos Labs’ long-term vision.

Chaos Labs Fundraising

Chaos Labs has successfully raised $79 million to fuel its growth in the DeFi security space. The company began with an undisclosed early round, followed by a $20 million seed round in February 2023, led by Galaxy and PayPal Ventures. Notable investors such as Coinbase, Uniswap, and Lightspeed also participated, helping Chaos Labs expand its suite of on-chain risk optimization products.

Chaos Labs raised an additional $55 million in its most recent Series A round. This round, led by Haun Ventures, saw participation from F-Prime Capital, Slow Ventures, and Spartan Capital, among others. This funding will further develop its automated risk management tools and solidify its position as a leader in DeFi security.

Conclusion

Chaos Labs is pioneering the future of DeFi security with its advanced Edge Oracle Network and cutting-edge risk management solutions. By integrating real-time risk mitigation and cross-chain intelligence, Chaos Labs transforms decentralized finance into a more secure and resilient ecosystem.

As the demand for robust DeFi infrastructure grows, Chaos Labs is positioned to lead this evolution, empowering protocols with innovative tools that ensure transparency, efficiency, and long-term sustainability in the ever-expanding DeFi landscape.