Chaos Labs Raises $20M for DeFi Protocols’ Risk Suite

Chaos Labs has raised $20 million in seed funding to expand its risk suite that helps protect decentralized finance (DeFi) protocols.

The firm was founded to secure protocols against economic vulnerabilities and market manipulation. Economic simulations cover a surface area that is not protected by other crypto security measures like security audits, penetration testing and formal verification, Chaos Labs said in a Tuesday (Feb. 21) blog post.

“In our first year, Chaos Labs has partnered with some of the top DeFi protocols, 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,” Chaos Labs founder and CEO Omer Goldberg said in the post.

Cyberthieves are increasingly targeting DeFi platforms, the Federal Bureau of Investigation (FBI) said in August 2022.

Ninety-seven percent the $1.3 billion swiped in crypto by cyberthieves between January and March 2022 was stolen from DeFi platforms — a figure that was up from 72% in 2021 and 30% in 2020 — according to a notice from the Internet Crime Complaint Center (IC3), a division of the FBI.

DeFi’s “complexity of cross-chain functionality and open source nature” make it easier for cybercriminals to take advantage of “investors’ increased interest in cryptocurrencies,” ic3 said at the time.

Chaos Labs’ existing risk suite includes products that help DeFi protocols optimize risk and capital efficiency, streamline risk assessments and optimize spending, according to the post.

With its new capital, the firm will add to its team and develop a holistic risk suite of tooling to help protocol and investment teams protect their funds from market-based attacks and optimize their capital efficiency, the post said.

“Over the coming years, we expect all money transacting on blockchains to run through risk assessment, simulationsand exploit-prevention tooling. Be it through automated allocation adjustments based on market conditions or complex simulations stress testing different market environments,” Goldberg said in the post. “Chaos, in the end, will be a cornerstone piece of infrastructure increasing the GDP of the blockchain economy by putting sophisticated and cutting-edge risk management software in the hands of builders and investors.”