Coalition Unveils Plan to Mitigate Aave Token Exploit

The aftermath of a $300 million exploit typically doesn't come with a straightforward repair guide. However, DeFi United is attempting to create one. Following the Kelp DAO hack earlier this month, which sent shockwaves through DeFi lending markets and released over 116,000 unaccounted-for tokens, the coalition has outlined a step-by-step plan to restore rsETH's backing. The proposal relies heavily on Aave's infrastructure to rectify the damage and stabilize the markets. The hack, which occurred on April 18, exploited a vulnerability in rsETH's bridge, resulting in the creation of 116,500 rsETH without backing. These tokens were dispersed across multiple wallets and utilized as collateral on Aave and other lending platforms, causing systemic issues. According to the proposal, approximately 107,000 of the exploited funds remain tied up in active positions across Aave and Compound. DeFi United's plan aims to address the dual issues of restoring rsETH's backing and unwinding the loans created using the extra tokens. The group claims to have secured sufficient ETH commitments to fully re-collateralize rsETH and plans to reintroduce the ETH into the system in stages. Meanwhile, the plan involves carefully unwinding the lending market damage by dealing with the attacker's positions on Aave and temporarily adjusting rsETH's valuation to facilitate a more controlled liquidation of the bad positions. This could potentially recover around 13,000 ETH from Aave alone, which would then be converted into ETH to cover the exploit's shortfall. Although the process carries risks, it represents a more coordinated response than DeFi has typically managed. If executed successfully, the plan's objective is to fully restore rsETH's backing and stabilize the affected markets.