Kelp DAO Disputes LayerZero's Claims, Says Default Settings Led to $290 Million Loss

A recent crypto incident has sparked a heated debate, with Kelp DAO set to challenge LayerZero's account of the $290 million exploit that occurred on Sunday. According to a source familiar with the matter, Kelp DAO plans to dispute LayerZero's claim that it ignored warnings to change its single-verifier setup. Kelp DAO is a liquid restaking protocol that uses LayerZero's cross-chain messaging infrastructure to move its receipt token, rsETH, between blockchains. The protocol relies on entities called decentralized verifier networks (DVNs) to verify the validity of cross-chain transfers. On Saturday, attackers drained 116,500 rsETH, worth approximately $290 million, from Kelp's LayerZero-powered bridge by compromising the servers that LayerZero's verifier used to check transactions. Kelp DAO claims that the compromised DVN was part of LayerZero's own infrastructure, not a third-party verifier, and that the setup was based on LayerZero's default configuration. The source also contested LayerZero's framing of the '1/1 configuration' as a fringe choice made against guidance, stating that LayerZero's own quickstart guide and default GitHub configuration point to a 1/1 DVN setup. Security researchers have also questioned LayerZero's isolated framing, which pinned the blame on Kelp DAO. Yearn Finance core team developer Artem K reviewed LayerZero's public deployment code and found 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 DAO under the bus for trusting a setup that LayerZero itself supported. 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 operated on LayerZero infrastructure since January 2024, maintaining close communication with the LayerZero team.