Aave, a lending platform, has successfully raised approximately $160 million to cover the $200 million in bad debt resulting from the largest decentralized finance exploit of the year, as reported by Arkham on Saturday. The blockchain analytics platform noted that the largest contributors to this effort are Mantle and Aave DAO, who together have raised 55,000 ETH, valued at $127 million.
Following a $292 million security breach that left Aave facing a financial crisis, the company joined forces with major crypto firms to launch a coordinated recovery effort, known as DeFi United, aimed at stabilizing DeFi markets. Led by Aave service providers, the initiative seeks to restore support for rsETH, the yield-bearing derivative token of ether at the heart of the exploit. Aave founder Stani Kulecho has personally contributed 5,000 ETH to DeFi United, equivalent to approximately $11,730,000 at the current ether price. The exploit, which was traced back to a vulnerability in KelpDAO's integration with LayerZero, resulted in the minting of 116,500 unbacked rsETH tokens, impairing Aave's collateral and triggering a massive withdrawal of $10 billion.
The primary focus of the bailout effort is to stabilize the system and mitigate losses by recapitalizing rsETH. This incident follows the second-largest exploit of the year, which occurred in late March, where an attacker drained at least $270 million from the Drift Protocol on Solana by exploiting a legitimate feature called 'durable nonces'.