Kelp DAO Disputes LayerZero's Claims Regarding $290 Million Exploit

A recent $290 million disaster has sparked a heated debate between Kelp DAO and LayerZero, with each side pointing fingers at the other. The controversy revolves around a massive exploit that occurred on Sunday, resulting in significant financial losses. According to sources familiar with the matter, Kelp DAO plans to contest LayerZero's claims that the liquid restaking protocol ignored repeated warnings to change its single-verifier setup. Instead, Kelp asserts that the compromised verifier was part of LayerZero's own infrastructure and that the setup was based on LayerZero's default onboarding settings. The incident has raised questions about the security and reliability of cross-chain messaging protocols. Kelp DAO relies on LayerZero's infrastructure to facilitate the movement of its receipt token, rsETH, between blockchains. The protocol uses a yield-generating system called EigenLayer and issues rsETH in exchange for user-deposited ether. The recent exploit occurred when attackers drained 116,500 rsETH, worth approximately $290 million, from Kelp's LayerZero-powered bridge by poisoning the servers that LayerZero's verifier relied on to check transactions. Kelp claims that the compromised infrastructure was built and run by LayerZero, not by the protocol itself. The source also contested LayerZero's framing of the '1/1 configuration' as a fringe choice made against guidance, stating that LayerZero's post-mortem said KelpDAO chose a 1-of-1 DVN setup despite expressing recommendations to configure multi-DVN redundancy. However, Kelp argues that LayerZero's own quickstart guide and default GitHub configuration point to a 1/1 DVN setup, and that 40% of protocols on LayerZero are currently using the same configuration. The incident has sparked a wider debate about the security of cross-chain messaging protocols, with some security researchers and experts questioning LayerZero's isolated framing of the incident. Yearn Finance core team developer Artem K, also known as @banteg on X, posted a technical review of LayerZero's public deployment code, noting that the reference setup ships with single-source verification defaults across every major chain. Chainlink community manager Zach Rynes accused LayerZero of 'deflecting responsibility' for its own compromised infrastructure and throwing Kelp under the bus for trusting a setup that LayerZero itself supported. In response to the incident, LayerZero has announced that it will no longer sign messages for any application running a single-verifier setup, forcing a protocol-wide migration. Kelp DAO has confirmed that the 1-of-1 DVN setup at the center of the incident reflects LayerZero's documented default configuration and has maintained close communication with the LayerZero team. The team behind LayerZero is working to 'harden security across every possible vector for applications' and has stated that the initial investigations have been 'largely resolved'.