Kelp DAO Disputes LayerZero's Claims Regarding $290 Million Disaster

A recent cryptocurrency exploit has sparked a heated debate between Kelp DAO and LayerZero, with each party assigning blame to the other. The incident in question involves a $290 million disaster that occurred when attackers drained 116,500 rsETH from Kelp's LayerZero-powered bridge by poisoning the servers that LayerZero's verifier relied on. According to Kelp DAO, the compromised decentralized verifier network (DVN) was part of LayerZero's own infrastructure, and the setup that was faulted for the exploit was actually LayerZero's default configuration. Kelp DAO plans to dispute LayerZero's post-mortem of the incident, which essentially blames Kelp for ignoring repeated warnings to move away from a single-verifier setup. The source familiar with the matter claims that Kelp is not at fault and that the DVN that was compromised was built and run by LayerZero. Furthermore, the source argues that LayerZero's own quickstart guide and default GitHub configuration point to a 1/1 DVN setup, which is the same configuration that Kelp used. This configuration is also used by 40% of protocols on LayerZero. Security researchers have also weighed in on the issue, with some arguing that LayerZero is deflecting responsibility for its own compromised infrastructure. Yearn Finance core team developer Artem K, also known as @banteg on X, posted a technical review of LayerZero's public deployment code, noting that the reference setup ships with single-source verification defaults across every major chain. Chainlink community manager Zach Rynes accused LayerZero of throwing Kelp under the bus for trusting a setup that LayerZero itself supported. In response to the incident, LayerZero has announced that it will no longer sign messages for any application running a single-verifier setup, forcing a protocol-wide migration. 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. The team behind LayerZero is working to harden security across every possible vector for applications.