Chaos Labs Inc. has raised $20m in seed funding in an investment round that was led by PayPal Ventures – the venture arm for payments giant PayPal Holdings Inc. – and Galaxy Digital, a leading investment firm.
The round also included notable crypto firms and investors, such as Coinbase Ventures and Uniswap. Other participants were Lightspeed, OpenSea Polygon, Hashkey and Uniswap.
Chaos Labs’ platform provides protection against malicious attacks, such as decentralized finance protocol risks. This is done through proactive simulation and automated monitoring. This is done by providing processes to test inputs, outputs, and scenarios that simulate attacks and other events in real life. Then the platform suggests mitigations.
Decentralized finance (also known as DeFi) is a financial technology built on decentralized ledgers. It uses smart contracts and peer-topeer token transactions to bypass intermediaries like banks and provide basic and complex services. DeFi protocol developers created decentralized economic systems that allowed people to create savings accounts, loans with interest, securities, indexes of the market, and other financial services.
Omer GOLDBERG, CEO and founder of the company said: “As we move from the opaqueness of traditional finance towards a DeFi-based system that is more open to the public, risk management needs to be improved accordingly.” Chaos Labs believes that each DeFi protocol should regularly perform robust risk tests to ensure that the economic system remains secure from hackers and unexpected volatility.
A report by Chainalysis shows that DeFi protocols appear to be particularly vulnerable to hacker attacks and exploits. DeFi protocol losses in 2022 amounted to $3.1 billion, or 82% of the cryptocurrency that hackers stole in 2022. This is an increase from 73%. In the same report, it was suggested that to strengthen protocols, they should be subjected to simulated hacking and attacks.
Chaos Labs was founded in 2021 and has since partnered with many major DeFi clients. These include DeFi lending platform Aave; yield-generating platforms BENQI; crypto swap platforms Osmosis; and trading platforms dYdX. Aave V3 is using the platform’s engine for risk mitigation and optimization.
Amman Bhasin, partner at PayPal Ventures said: “The range of exploits is growing as crypto technology accelerates. Chaos Labs aims to address this issue by equipping protocols, investors and users with risk management and optimization software that will protect against such vulnerabilities.
PayPal’s interest in cryptocurrency has grown over time. The payments giant began by allowing its users to trade cryptocurrencies on their own account in 2020. The company later acquired digital asset startup Curv Inc. which is a developer of security technology for digital assets. In the past year, users were able to withdraw their bitcoins from the platform directly into their personal wallets.