In the aftermath of a $292 million exploit, Aave and several prominent crypto companies have launched a collaborative recovery effort, dubbed 'DeFi United', to shore up decentralized finance markets. The initiative aims to restore the collateral backing of rsETH, a yield-bearing ether derivative token at the center of the exploit. Aave has announced that multiple participants have committed to supporting the effort, with Lido Finance's ecosystem contributor, Lido Labs Foundation, proposing to allocate up to 2,500 stETH, valued at approximately $5.7 million, to a dedicated relief fund. EtherFi has also proposed a 5,000 ETH plan to safeguard users and prevent bad debt across DeFi.
Aave's founder, Stani Kulechov, has pledged a 5,000 ETH contribution, stating that 'Aave is my life's work and we're working nonstop to find the best possible outcome for users.' The initiative follows the largest crypto exploit of the year, which exposed a vulnerability in KelpDAO's integration with LayerZero, allowing an attacker to mint 116,500 unbacked rsETH tokens. The attacker then deposited nearly 90,000 rsETH into Aave as collateral, borrowing around $190 million in ETH and other assets, leaving Aave with impaired collateral and triggering a run on deposits.
The total value of assets on Aave plummeted by $10 billion in the wake of the incident. With an estimated total shortfall of over 112,000 rsETH, according to Aave's incident report, the DeFi United initiative focuses on stabilizing the system through a coordinated bailout, rather than attempting to recover the stolen funds.