In the aftermath of a $292 million exploit, Aave and several prominent crypto firms have launched a collaborative recovery effort, dubbed 'DeFi United', to stabilize decentralized finance (DeFi) markets. The initiative aims to restore the collateral backing of rsETH, a yield-bearing ether (ETH) derivative token, which was severely impacted by the exploit.
Aave has announced that multiple participants have committed to supporting the effort, with Lido Finance and EtherFi being among the first to offer aid. Lido Labs Foundation has proposed allocating up to 2,500 stETH, valued at approximately $5.7 million, to a dedicated relief fund, while EtherFi has proposed a 5,000 ETH plan to protect users and prevent bad debt. Aave's founder, Stani Kulechov, has also pledged 5,000 ETH to the cause. The funds will be used to reduce the shortfall in rsETH backing and prevent forced liquidations across lending markets.
The exploit, which occurred due to a vulnerability in KelpDAO's integration with LayerZero, resulted in the attacker minting 116,500 unbacked rsETH tokens and borrowing approximately $190 million in ETH and other assets. This led to a significant impairment of Aave's collateral, triggering a run on deposits and a $10 billion plunge in the total value of assets on the platform. The DeFi United initiative marks a coordinated effort to stabilize the system, with a focus on recapitalizing rsETH and mitigating losses, rather than attempting to recover the stolen funds.