Chaos Labs has recently announced the successful completion of its seed funding round, raising $20 million led by Galaxy and PayPal Ventures, with participation from Coinbase, Uniswap, Lightspeed, Bessemer, Hashkey, and top angels such as Balaji Srinivasan and Naval Ravikant.
The funding will be used to expand Chaos Labs’ offerings and build out its suite of risk and security products.
Founded in October 2021 by CEO Omer Goldberg, Chaos Labs is the first automated risk management platform for crypto, operating with best-in-class security practices, including robust agent- and scenario-based simulations. Its goal is to protect DeFi protocols against economic system exploits and insufficient risk parameters, which have become increasingly important as malicious actors and nation-states exploit on-chain protocol vulnerabilities. According to The Block, total funds lost in 2022 to DeFi exploits reached $2.05 billion, a 48% increase from the previous year.
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Chaos Labs’ suite of risk and security products is designed to help protect DeFi protocols of all structures from malicious attacks with preventative measures and monitoring tooling. It arms teams and communities with protocol-specific simulation models to understand the impact of varying parameter settings on protocol capital efficiency and risk. 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.
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.
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. 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.
Additionally, Chaos Labs worked with dYdX, creating an asset listing portal to support adding new assets. The company also 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 on on-chain risk management and mitigation, and Chaos Labs is the type of software solution the industry needs. Galaxy Ventures and PayPal Ventures, the lead investors in the seed funding round, believe that Chaos Labs plays a critical role in building standardized practices for protocol safety as more assets move on-chain.
“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.”
Omer Goldberg, CEO and Founder of Chaos Labs, stated, “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.”
The investment from Galaxy and PayPal Ventures, along with other top investors,