Why Aave's $42B risk model faces its first real test after Chaos Labs' exit - AMBCrypto

Risk management in DeFi now plays a central role in how protocols perform, especially during volatile periods. As Q1 2026 ended, Aave [AAVE] managed about $42.34 billion in TVL and $16.55 billion in loans; it relies on continuous adjustments rather than fixed settings.

External teams like Chaos Labs update liquidation thresholds, borrow limits, and collateral rules as conditions change.

As these updates happen more often, the system responds faster to market stress. This improves stability and user confidence, although it also means protocols depend more on external risk models as complexity increases.