Crypto Coalition Unveils Plan to Mitigate Aave Token Exploit

A recent hack has left a $300 million gap, and DeFi United is attempting to create a recovery plan. The coalition, comprising multiple blockchain projects and individuals, has outlined a detailed proposal to revive the rsETH token after the Kelp DAO hack sent shockwaves through DeFi lending markets, releasing over 116,000 unaccounted tokens. The plan, shared on Aave's official X account, resembles a coordinated effort to utilize Aave's infrastructure and rectify the damage. The incident began on April 18 when an attacker exploited a vulnerability in rsETH's bridge, tricking the system into releasing 116,500 rsETH without backing. These tokens were dispersed across multiple wallets and used as collateral on Aave and other lending platforms, causing protocols to hold unbacked collateral. DeFi United's proposal aims to address two primary issues: restoring rsETH's backing and unwinding loans created using the exploited tokens. The group claims to have secured enough ETH commitments to re-collateralize rsETH and plans to feed it back into the system in stages. The proposal also involves carefully unwinding the mess in lending markets by temporarily adjusting rsETH's valuation to enable the liquidation of bad positions. This could potentially recover around 13,000 ETH from Aave, which would be converted into ETH to cover the exploit's shortfall. The process relies on governance approvals, successful fund deployment, and smooth execution. If successful, the plan aims to fully restore rsETH's backing and stabilize affected markets.