Aave Faces $6 Billion Deposit Exodus After Kelp Hack Exposes DeFi Vulnerabilities

Aave witnessed a staggering $6.6 billion withdrawal, not due to a direct hack, but as a result of a vulnerability exposed by the Kelp hack. The protocol's total value locked plummeted from $26.4 billion to nearly $20 billion, with the AAVE token falling 16% to $92 and daily fees surging to $1.99 million amidst a wave of liquidations. Depositors are fleeing Aave due to a hole created by the Kelp hack, where attackers drained 116,500 rsETH and used it as collateral to borrow wrapped ether on Aave V3, leaving the protocol to quantify its bad debt. The attack has highlighted the structural risks associated with DeFi lending and the potential contagion risk that Aave poses to the entire DeFi ecosystem.