In the aftermath of a $292 million exploit, Aave has joined forces with prominent crypto firms to launch a recovery initiative aimed at stabilizing the DeFi markets. The effort, dubbed 'DeFi United', focuses on restoring the collateral backing of rsETH, a yield-bearing ether derivative token at the center of the exploit. Aave has announced that multiple participants have committed to supporting the initiative, with Lido Finance's ecosystem contributor, Lido Labs Foundation, proposing to allocate up to 2,500 stETH, valued at approximately $5.7 million, to a dedicated relief fund. EtherFi has also proposed a 5,000 ETH plan to safeguard users and prevent bad debt across DeFi.
Aave's founder, Stani Kulechov, has pledged a 5,000 ETH contribution, 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 approximately $190 million in ETH and other assets. This triggered a run on deposits, resulting in a $10 billion decline in Aave's total asset value. The estimated shortfall is over 112,000 rsETH, according to Aave's incident report.
Prior to the DeFi United initiative, Arbitrum's security council had frozen 30,766 ETH, worth roughly $71 million, tied to the exploit. However, the remaining stolen funds were bridged and swapped into bitcoin via Thorchain, complicating recovery efforts. The current initiative prioritizes stabilizing the system through a coordinated bailout to recapitalize rsETH and mitigate losses, rather than focusing on recovering the stolen funds.