Crypto Coalition Unveils Plan to Mitigate Aave Token Exploit

A recent $300 million exploit has prompted a coalition of blockchain projects and crypto ecosystem players to devise a recovery plan. DeFi United's proposal outlines a step-by-step approach to restore the backing of rsETH, which was compromised after the Kelp DAO hack released over 116,000 unaccounted-for tokens. The plan, shared on Aave's official X account, leverages Aave's infrastructure to undo the damage and stabilize markets. The exploit, which occurred on April 18, involved an attacker forging a message to trick the Ethereum side of the rsETH bridge into releasing 116,500 rsETH without proper backing. These tokens were then dispersed across multiple wallets and used as collateral on Aave and other lending platforms, creating a systemic issue. DeFi United's proposal aims to address the dual challenges of re-collateralizing rsETH and unwinding the loans created using the exploited tokens. The plan involves lining up sufficient ETH commitments to fully re-collateralize rsETH, which will be fed back into the system in stages. Concurrently, the proposal seeks to carefully unwind the lending market damage by temporarily adjusting rsETH's valuation, enabling the controlled closure of positions backed by the exploited tokens. This process is expected to recover around 13,000 ETH from Aave, which will be converted into ETH to cover the shortfall. Although the plan carries risks, including the need for governance approvals and smooth execution, it represents a coordinated response to the exploit. If successful, the proposal aims to fully restore rsETH backing and stabilize affected markets.