Decentralized lending platform Aave has successfully raised approximately $160 million to mitigate the $200 million in bad debt stemming from this year's most significant decentralized finance exploit, as reported by Arkham on Saturday. The blockchain analytics platform stated, 'Aave has raised $160M to cover the bad debt from the Kelp DAO exploit, via defiunited.eth, with Mantle and AAVE DAO being the largest contributors, collectively raising 55,000 ETH or $127M.' Following a $292 million security breach that left the largest lender in the crypto borrowing sector facing a financial crisis, Aave and major crypto firms launched a coordinated recovery effort last week to stabilize DeFi markets. Dubbed DeFi United and led by Aave service providers, the initiative aims to restore support for rsETH, the yield-bearing derivative token of ether at the heart of the exploit. Aave founder Stani Kulecho announced, 'I am personally contributing 5,000 ETH to DeFi United as we continue collaborating with partners.' At the current ether price of approximately $2,346, his contribution is valued at $11,730,000.
The exploit was traced back to a vulnerability in KelpDAO's integration with LayerZero, where an attacker minted 116,500 unbacked rsETH tokens, resulting in impaired collateral for Aave and triggering a massive withdrawal of $10 billion. The bailout effort focuses on stabilizing the system by recapitalizing rsETH and minimizing losses.
This year's second-largest exploit occurred in late March, when an attacker drained at least $270 million from the Drift Protocol on Solana by exploiting a legitimate feature called 'durable nonces.'