Coalition Unveils Rescue Plan to Mitigate Aave Token Exploit

A coalition of blockchain projects and crypto ecosystem players is attempting to rectify a $300 million deficit with a detailed repair plan. DeFi United has devised a step-by-step proposal to revive the backing of rsETH following the Kelp DAO hack, which sent shockwaves through lending markets after releasing over 116,000 unaccounted tokens. The plan, shared on Aave's official X account, resembles a coordinated cleanup effort, relying heavily on Aave's infrastructure to rectify the damage and restore market stability. The incident occurred on April 18 when an attacker exploited a vulnerability in rsETH's bridge, tricking the Ethereum side into releasing 116,500 rsETH without proper backing. These tokens were then dispersed across multiple wallets and deployed in DeFi, with a significant portion used as collateral on Aave and other lending platforms, causing systemic issues. According to the proposal, most of the exploited funds remain active, with approximately 107,000 of the original 116,500 rsETH still tied up in positions across Aave and Compound. DeFi United's proposal aims to address both the restoration of rsETH's backing and the unwinding of loans created using the extra tokens. The group claims to have secured sufficient ETH commitments to fully re-collateralize rsETH, planning to feed the ETH back into the system in stages. Meanwhile, the plan involves carefully unwinding the mess in lending markets by dealing with the attacker's positions on Aave, which are essentially loans backed by rsETH that should not have existed. By temporarily adjusting rsETH's valuation, the proposal suggests closing out these bad positions in a more controlled manner, potentially freeing up around 13,000 ETH from Aave. Once the collateral is recovered, it will be converted into ETH to cover the shortfall created by the exploit. While the process carries risks, it reflects a more coordinated response than DeFi has often managed previously, with the ultimate goal of fully restoring rsETH's backing and stabilizing affected markets.