Aave, a leading lending platform, has successfully raised approximately $160 million to mitigate the $200 million in bad debt resulting from the Kelp DAO exploit, as reported by blockchain analytics firm Arkham on Saturday. The largest contributors to this effort are Mantle and Aave DAO, which have collectively raised 55,000 ETH, valued at $127 million.
This development follows a coordinated recovery effort, known as DeFi United, launched by Aave and major crypto firms to stabilize DeFi markets after a $292 million security breach. The initiative aims to restore support for rsETH, a yield-bearing derivative token of ether, which was at the center of the exploit.
Aave's founder, Stani Kulechov, has personally contributed 5,000 ETH, equivalent to $11,730,000, to support this cause. The exploit, which originated from a vulnerability in KelpDAO's integration with LayerZero, led to the minting of 116,500 unbacked rsETH tokens, resulting in impaired collateral for Aave and a subsequent $10 billion withdrawal by lenders. The primary focus of the bailout effort is to stabilize the system, recapitalize rsETH, and minimize losses.
This incident is the largest DeFi exploit of the year, surpassing the $270 million drained from the Drift Protocol on Solana in late March, which was perpetrated by abusing a legitimate feature called 'durable nonces'.