Coalition Unveils Plan to Mitigate Aave Token Exploit

The aftermath of a $300 million exploit typically doesn't come with a straightforward solution. However, DeFi United, a coalition comprising multiple blockchain projects and crypto ecosystem stakeholders, has devised a detailed, multi-step plan to rectify the damage caused by the recent Kelp DAO hack. This hack sent shockwaves through DeFi lending markets by releasing over 116,000 unaccounted-for tokens. The proposal outlines a coordinated effort, leveraging Aave's infrastructure to rectify the situation and stabilize markets. The exploit, which occurred on April 18, involved an attacker exploiting a vulnerability in rsETH's bridge, resulting in the release of 116,500 rsETH tokens without proper backing. These tokens were then dispersed across multiple wallets and utilized as collateral on various lending platforms, including Aave. DeFi United's proposal aims to address two primary issues: restoring rsETH's backing and unwinding the loans created using the exploited tokens. The plan involves lining up sufficient ETH commitments to re-collateralize rsETH and feeding this ETH back into the system in stages. Concurrently, the proposal focuses on carefully unwinding the damage in lending markets by addressing the positions opened by the attacker on Aave. This involves temporarily adjusting rsETH's valuation within the system to facilitate the smooth closure of these positions, potentially freeing up around 13,000 ETH from Aave. The recovered collateral will then be converted into ETH to cover the shortfall created by the exploit. Although the process carries risks, including the need for governance approvals and successful fund deployment, it represents a concerted effort to mitigate the exploit's impact. The ultimate goal, as stated in the proposal, is to fully restore rsETH's backing and stabilize all affected markets.