Coalition Unveils Plan to Mitigate Aave Token Exploit

A novel approach is being taken to address a $300 million shortfall. DeFi United, a coalition of blockchain projects and crypto ecosystem stakeholders, has outlined a step-by-step plan to re-establish the backing of rsETH following the Kelp DAO hack, which sent shockwaves through lending markets and released over 116,000 unaccounted-for tokens. The proposal, shared on Aave's official X account, details a coordinated effort to utilize Aave's infrastructure and stabilize the markets. The incident originated from an exploit of rsETH's bridge on April 18, where an attacker forged a message, tricking the Ethereum side into releasing 116,500 rsETH without actual backing. These tokens were then dispersed across multiple wallets and utilized as collateral on lending platforms, including Aave. The proposal aims to address the dual issues of restoring rsETH's backing and unwinding the loans created using the exploited tokens. DeFi United claims to have secured sufficient ETH commitments to fully re-collateralize rsETH and plans to reintroduce this ETH into the system in stages. Concurrently, the plan involves carefully unwinding the lending market damage by temporarily adjusting rsETH's valuation, enabling the liquidation or closure of positions opened by the attacker. This controlled unwind is expected to recover approximately 13,000 ETH from Aave, which will then be converted to cover the exploit-induced shortfall. Although the process carries risks, including the need for governance approvals and successful fund deployment, it represents a coordinated response to the crisis. The ultimate objective is to fully restore rsETH's backing and stabilize the affected markets.