Kelp DAO Alleges LayerZero's Default Settings Caused $290 Million Disaster

A recent $290 million crypto disaster has sparked a heated debate between Kelp DAO and LayerZero. The liquid restaking protocol is pushing back against LayerZero's post-mortem of the incident, which blamed Kelp for ignoring warnings about its single-verifier setup. However, Kelp claims that the compromised verifier was actually part of LayerZero's own infrastructure and that the setup was LayerZero's default configuration. According to a source familiar with the matter, Kelp plans to argue that LayerZero's own quickstart guide and default GitHub configuration recommend a 1/1 DVN setup, which is the same configuration used by 40% of protocols on LayerZero. The incident occurred when attackers drained 116,500 rsETH, worth about $290 million, from Kelp's LayerZero-powered bridge by poisoning the servers that LayerZero's verifier relied on to check transactions. Kelp's core restaking contracts were not touched, and the exploit was isolated to the bridge layer. The company's emergency pause, 46 minutes after the drain, blocked two follow-up attempts that would have released an additional ~$200 million in rsETH. Security researchers have also questioned LayerZero's framing of the incident, with one researcher noting that LayerZero's reference setup ships with single-source verification defaults across every major chain. The incident has sparked a wider debate about the security of crypto protocols and the need for greater transparency and accountability.