Coalition Unveils Plan to Mitigate Aave Token Exploit

A novel approach to crisis management is unfolding in the wake of a $300 million exploit. DeFi United, a collective of blockchain projects and crypto ecosystem stakeholders, has put forth a comprehensive plan to rectify the damage caused by the Kelp DAO hack. The proposal outlines a coordinated effort to restore the backing of rsETH, leveraging Aave's infrastructure to unwind the damage and stabilize markets. The incident, which occurred on April 18, involved an attacker exploiting a vulnerability in rsETH's bridge, resulting in the release of 116,500 rsETH without proper backing. These tokens were subsequently dispersed across multiple wallets and deployed in DeFi, with a significant portion used as collateral on Aave and other lending platforms. DeFi United's plan aims to address the dual challenges of restoring rsETH's backing and unwinding the loans created using the exploited tokens. With sufficient ETH commitments already secured to re-collateralize rsETH, the plan involves feeding this ETH back into the system in stages, while also carefully unwinding the affected loans to minimize market disruption. By temporarily adjusting rsETH's valuation, the proposal enables the closure of bad positions, allowing for the recovery of underlying assets like ETH. The process, although not without risk, represents a coordinated response to the crisis, with the ultimate goal of fully restoring rsETH's backing and stabilizing affected markets.