In response to a massive $292 million exploit, Aave and several prominent cryptocurrency firms have launched a collaborative recovery effort, dubbed 'DeFi United', aimed at stabilizing the decentralized finance (DeFi) market. The initiative seeks to restore the collateral backing of rsETH, a yield-bearing ether (ETH) derivative token at the center of the exploit.
Multiple participants, including staking provider Lido Finance and EtherFi, have already committed to supporting the effort, with Lido proposing to allocate up to 2,500 stETH, valued at approximately $5.7 million, to a dedicated relief fund. The funds will be utilized to reduce the shortfall in rsETH backing and prevent forced liquidations across lending markets. Aave's founder, Stani Kulechov, has also pledged a 5,000 ETH contribution, stating that 'Aave is my life's work and we're working nonstop to find the best possible outcome for users.' The initiative follows the biggest 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 around $190 million in ETH and other assets, resulting in impaired collateral and triggering a run on deposits.
The total value of assets on Aave plummeted by $10 billion in the aftermath of the incident. With an estimated total hole of over 112,000 rsETH, according to Aave's incident report, the DeFi United initiative focuses on stabilizing the system through a coordinated bailout, rather than attempting to recover the stolen funds.