In response to a devastating $292 million exploit, Aave and several prominent crypto firms have collaborated on a recovery effort, dubbed 'DeFi United', aimed at stabilizing decentralized finance (DeFi) markets. The initiative focuses on restoring the collateral backing of rsETH, a yield-bearing ether (ETH) derivative token at the center of the exploit. Aave has announced that multiple participants have committed to supporting the effort, with staking provider Lido Finance and EtherFi being among the first to offer aid. Lido Labs Foundation has proposed allocating up to 2,500 stETH, valued at approximately $5.7 million, to a dedicated relief vehicle, while EtherFi has suggested a 5,000 ETH plan to protect users and prevent bad debt.
Aave's founder, Stani Kulechov, has also pledged 5,000 ETH to support the initiative. The goal of DeFi United is to reduce the shortfall in rsETH backing, prevent forced liquidations across lending markets, and restore market stability. The exploit, which occurred due to a vulnerability in KelpDAO's integration with LayerZero, resulted in the attacker minting 116,500 unbacked rsETH tokens and borrowing approximately $190 million in ETH and other assets.
The incident triggered a run on deposits, causing the total value of assets on Aave to plummet by $10 billion. Prior to the DeFi United initiative, some early containment efforts were made, including Arbitrum's security council freezing 30,766 ETH tied to the exploit.
However, the remaining stolen funds were bridged and swapped into bitcoin via Thorchain, complicating the recovery process. The current effort prioritizes stabilizing the system through a coordinated bailout, aiming to recapitalize rsETH and mitigate losses.