In the aftermath of a $292 million exploit, Aave and several prominent crypto firms have launched a collaborative recovery effort, dubbed 'DeFi United', to shore up decentralized finance (DeFi) markets. The initiative aims to restore the backing of rsETH, a yield-bearing ether (ETH) derivative token at the center of the exploit. Aave has announced that multiple participants have committed to supporting the effort, with staking provider Lido Finance and EtherFi being among the first to offer aid.
Lido Labs Foundation has proposed allocating up to 2,500 stETH, valued at approximately $5.7 million, to a dedicated relief fund, while EtherFi has put forth a 5,000 ETH plan to safeguard users and prevent bad debt. Aave founder Stani Kulechov has also pledged 5,000 ETH, stating that 'Aave is my life's work and we're working tirelessly to find the best possible outcome for users.' The initiative follows the largest crypto exploit of the year, which exposed a vulnerability in KelpDAO's integration with LayerZero, allowing an attacker to mint 116,500 unbacked rsETH tokens.
The attacker then deposited nearly 90,000 rsETH into Aave as collateral, borrowing around $190 million in ETH and other assets, leaving Aave with impaired collateral and triggering a run on deposits. The total value of assets on Aave plummeted by $10 billion in the wake of the incident.
While early containment efforts, such as Arbitrum's security council freezing 30,766 ETH, have been made, the current focus is on stabilizing the system through a coordinated bailout to recapitalize rsETH and mitigate losses.