Kelp DAO Disputes LayerZero's Claims on $290 Million Disaster, Citing 'Default' Settings as the Cause

A recent cryptocurrency 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 plans to contest LayerZero's claim that it ignored repeated warnings to move away from a single-verifier setup. The dispute centers around the cross-chain messaging firm's assertion that Kelp was at fault for the massive loss. However, Kelp counters that the compromised verifier was actually part of LayerZero's own infrastructure and that the setup was based on LayerZero's default onboarding configuration. The incident involved the liquid restaking protocol Kelp, which takes user-deposited ether and issues a receipt token called rsETH. LayerZero is the cross-chain messaging infrastructure that facilitates the transfer of rsETH between blockchains, using decentralized verifier networks (DVNs) to verify transactions. 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 relied on. Kelp claims that the attackers compromised two of LayerZero's own servers, which were used to check the legitimacy of cross-chain transactions, and then flooded the backup servers with junk traffic to force LayerZero's verifier onto the compromised ones. The source close to the matter 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. Furthermore, 40% of protocols on LayerZero are currently using the same configuration. Security researchers have also expressed skepticism about LayerZero's isolated framing, which pinned the blame on Kelp. Yearn Finance core team developer Artem K 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 'deflecting responsibility' for its own compromised infrastructure and throwing Kelp under the bus for trusting a setup that LayerZero itself supported. In response to the incident, LayerZero has stated 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 maintained close communication with the LayerZero team. The team behind LayerZero is working to 'harden security across every possible vector for applications' and will publish more updates soon.