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

Aave has witnessed a staggering $6.6 billion exodus, not due to a direct hack, but rather a consequence of the Kelp bridge exploit. The protocol's total value locked plummeted from $26.4 billion to nearly $20 billion, with the AAVE token dropping 16% to $92 and daily fees surging to $1.99 million amidst a wave of liquidations. Depositors are fleeing as Aave grapples with a hole not of its making, created when attackers drained 116,500 rsETH from Kelp's bridge and used the stolen tokens as collateral to borrow wrapped ether on Aave V3. With on-chain trackers estimating the Aave-specific borrow at approximately $196 million, the protocol is now forced to quantify its bad debt and explore paths to offset the deficit. The concentration of Aave's loan book, with Ethereum alone holding $14.24 billion of the $17.82 billion in outstanding borrows, has exacerbated the damage. As the largest lending protocol in DeFi, Aave's acceptance of liquid restaking tokens as collateral has exposed it to unforeseen risks, prompting concerns about the fragility of the entire DeFi system.