Aave, a lending platform, has successfully raised approximately $160 million to offset 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 platform stated, 'Aave has so far raised $160M to cover the bad debt from the Kelp DAO Exploit, at defiunited.eth. The largest contributors are Mantle and AAVE DAO, who together raised 55,000 ETH or $127M.' Following a $292 million security breach that left the largest lender in the crypto borrowing sector facing a financial crisis, Aave and several major crypto firms announced a coordinated recovery effort to stabilize DeFi markets last week.
Led by Aave service providers, the initiative, known as DeFi United, aims to restore support for rsETH, the yield-bearing derivative token of ether at the core of the exploit. Aave founder Stani Kulecho stated, 'I’m personally contributing 5,000 ETH to DeFi United as we continue working together with partners.' With ether's current price of roughly $2,346, his personal contribution is worth $11,730,000. The exploit, which occurred due to a KelpDAO integration vulnerability with LayerZero, allowed an attacker to mint 116,500 unbacked rsETH tokens, leaving Aave with impaired collateral and triggering a run on deposits as lenders rushed to exit, ultimately withdrawing $10 billion. The effort to erase the bad debt is focused primarily on stabilizing the system through a coordinated bailout to recapitalize rsETH and mitigate losses.
Earlier this year, in late March, the second-largest exploit occurred when an attacker drained at least $270 million from the Drift Protocol on Solana by exploiting a legitimate feature called 'durable nonces.'