Aave Faces $6 Billion Deposit Exodus Amid Kelp Hack, Exposing DeFi Lender's Structural Vulnerabilities

Aave has witnessed a staggering $6.6 billion exodus, not due to a direct hack, but as a result of a devastating exploit on Kelp's bridge. The protocol's total value locked plummeted from $26.4 billion on April 18 to approximately $20 billion by Sunday morning, according to DefiLlama. The AAVE token suffered a 16% decline to $92, while daily fees surged to $1.99 million amidst a flurry of liquidations over the weekend. Depositors are fleeing due to Aave's unintended exposure to a significant hole. Attackers drained 116,500 rsETH from Kelp's bridge on Saturday and utilized the stolen tokens as collateral on Aave V3 to borrow wrapped ether. On-chain trackers estimate the Aave-specific borrow to be around $196 million, with total positions across Aave, Compound, and Euler reaching $236 million. As the largest lending protocol in DeFi, Aave enables users to deposit crypto to earn yield, while others borrow against collateral. Kelp, a liquid restaking protocol, takes ether that has already been staked on Ethereum and channels it through a separate yield-generating system called EigenLayer, issuing a receipt token, rsETH, in exchange. This rsETH is what users trade and, crucially, what some users posted as collateral on Aave to borrow against. On Saturday, attackers deceived Kelp's cross-chain bridge into releasing 116,500 rsETH, approximately $292 million worth, to a controlled address. They then deposited the stolen rsETH onto Aave V3 as collateral and borrowed wrapped ether against it. Aave initially stated that the Umbrella reserve would cover any deficit but later softened its stance to 'explore paths to offset the deficit.' The concentration of damage is attributed to Aave's loan book, which spans 22 chains, with Ethereum alone holding $14.24 billion of the $17.82 billion in outstanding borrows. WETH constitutes 39.49% of all loans on the protocol, making it the exact collateral-to-WETH pair that dominates Aave's book. Stani Kulechov, Aave's founder, confirmed that the exploit was external and the protocol's contracts were not compromised. However, Aave accepted a liquid restaking token as collateral, and the token's backing vanished on a bridge Aave does not control, ultimately affecting depositors. Liquid restaking tokens were whitelisted across major lending protocols due to their yield and representation of a growing share of Ethereum's locked value. Risk models priced them as if they would hold peg under normal conditions, but none accounted for a scenario where the collateral goes to zero because a bridge on a chain Aave does not touch got exploited. The token price is now attempting to determine whether Umbrella is sufficient to cover the hole and whether stkAAVE holders who back that reserve will absorb the loss.