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

The aftermath of a $300 million exploit typically doesn't have a straightforward solution, but DeFi United is attempting to change that. Following the Kelp DAO hack earlier this month, which sent shockwaves through DeFi lending markets, the coalition has outlined a step-by-step plan to revive the backing of rsETH. This detailed proposal, shared on Aave's official X account, resembles a coordinated recovery effort, relying heavily on Aave's infrastructure to rectify the damage and stabilize the markets. The exploit, which occurred on April 18, was the result of an attacker leveraging a vulnerability in rsETH's bridge, creating 116,500 rsETH tokens without proper backing. These tokens were dispersed across multiple wallets and utilized as collateral on various lending platforms, including Aave. The issue became systemic when protocols like Aave found themselves holding unbacked collateral. According to the proposal, approximately 107,000 of the exploited rsETH tokens remain tied up in active positions across Aave and Compound. DeFi United's plan aims to address two key issues: restoring rsETH's backing and unwinding the loans created using the exploited tokens. The coalition claims to have secured sufficient ETH commitments to fully re-collateralize rsETH, which will be fed back into the system in stages. Concurrently, the plan involves carefully unwinding the affected lending positions, including those opened by the attacker on Aave. By temporarily adjusting rsETH's valuation within the system, these positions can be liquidated or closed more smoothly, allowing for 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 to cover the shortfall created by the exploit. While the process carries some risks, including the need for governance approvals and the successful deployment of committed funds, it represents a coordinated response to the crisis. If executed successfully, the plan aims to fully restore rsETH's backing and stabilize the affected markets.