Coalition Unveils Plan to Mitigate $300 Million Crypto Exploit Affecting Aave Users

The aftermath of a $300 million exploit typically doesn't come with a straightforward repair guide. However, DeFi United, a coalition comprising multiple blockchain projects and crypto ecosystem individuals, is attempting to devise one. Following this month's Kelp DAO hack, which disrupted lending markets, the coalition has outlined a step-by-step plan to restore the backing of rsETH. The proposal, shared on Aave's official X account, resembles a coordinated cleanup operation that heavily relies on Aave's infrastructure to rectify the damage and stabilize the markets. The incident occurred on April 18 when an attacker exploited a vulnerability in rsETH's bridge, forging a message that appeared legitimate and tricking the Ethereum side into releasing 116,500 rsETH without proper backing. These tokens were then distributed across multiple wallets and utilized in DeFi, with a significant portion used as collateral on Aave and other lending platforms. As a result, protocols like Aave found themselves holding collateral that was temporarily under-backed, leading to a systemic problem. According to the proposal, most of the exploited funds remain active, with approximately 107,000 of the original 116,500 rsETH still tied up in positions across Aave and Compound. DeFi United's proposal aims to address both the restoration of rsETH's backing and the unwinding of loans created using the extra tokens. The group claims to have secured enough ETH commitments to fully re-collateralize rsETH and plans to feed this ETH back into the system in stages. Meanwhile, the proposal focuses on the lending markets where the damage is most visible. Instead of allowing the situation to unfold chaotically, the plan involves carefully unwinding the mess. This includes dealing with the positions the attacker opened on Aave, which are essentially loans backed by rsETH that should not have existed. By temporarily adjusting rsETH's valuation within the system, those bad positions can be liquidated or closed more smoothly, enabling the recovery of underlying assets like ETH. The proposal estimates that this could free up around 13,000 ETH from Aave alone. Once the collateral is recovered, it will be converted into ETH and used to cover the shortfall created by the exploit, effectively filling the hole left behind. Although the process carries risks, including governance approvals and the successful deployment of committed funds, the plan reflects a more coordinated response than DeFi has often managed previously. If executed as intended, the ultimate goal is to fully restore rsETH's backing and stabilize all affected markets.