Kelp DAO Disputes LayerZero's Claims Over $290 Million Exploit, Points to Default Settings

A recent cryptocurrency exploit has sparked a heated debate between Kelp DAO and LayerZero, with Kelp set to challenge LayerZero's post-mortem analysis of the $290 million disaster. According to a source familiar with the matter, Kelp will argue that the compromised verifier was part of LayerZero's own infrastructure, not a third-party verifier, and that the setup was based on LayerZero's default configuration. 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 claims that the attackers compromised two of LayerZero's own servers and then flooded the backup servers with junk traffic to force LayerZero's verifier onto the compromised ones. The source contested LayerZero's framing of the '1/1 configuration' as a fringe choice made against guidance, pointing out that LayerZero's own quickstart guide and default GitHub configuration recommend a 1/1 DVN setup, which 40% of protocols on LayerZero are currently using. Security researchers have also questioned LayerZero's isolated framing, which pinned the blame on Kelp, with some accusing LayerZero of deflecting responsibility for its own compromised infrastructure. Kelp has stated that it relied on LayerZero's documentation, defaults, and team guidance to make configuration decisions, and that it has operated on LayerZero infrastructure since January 2024 with close communication with the LayerZero team. LayerZero has announced that it will no longer sign messages for any application running a single-verifier setup, forcing a protocol-wide migration.