Decentralized lending platform Aave has successfully raised approximately $160 million to mitigate the $200 million in bad debt resulting from the largest decentralized finance exploit of the year, as reported by Arkham on Saturday. The blockchain analytics firm noted that the largest contributors to this effort are Mantle and Aave DAO, which together have raised 55,000 ETH, equivalent to $127 million.
Following a $292 million security breach that left Aave facing a financial crisis, the company and several major cryptocurrency firms launched a coordinated recovery effort, dubbed DeFi United, to stabilize DeFi markets. This initiative, led by Aave service providers, aims to restore support for rsETH, the yield-bearing derivative token of ether at the core of the exploit.
Aave founder Stani Kulechov has personally contributed 5,000 ETH to DeFi United, valued at approximately $11,730,000 at the current ether price of $2,346. The exploit, which was traced back to a vulnerability in KelpDAO's integration with LayerZero, resulted in the minting of 116,500 unbacked rsETH tokens, leaving Aave with impaired collateral and triggering a massive withdrawal of $10 billion. The primary focus of the bailout effort is to stabilize the system and mitigate losses by recapitalizing rsETH. This incident follows the second-largest exploit of the year, which occurred in late March when an attacker drained at least $270 million from the Drift Protocol on Solana by exploiting a legitimate feature called 'durable nonces'.