In the wake of a $292 million exploit, Aave and major cryptocurrency firms have joined forces to launch a stabilization effort aimed at restoring the collateral backing of rsETH, a yield-bearing ether derivative token at the center of the hack. The initiative, dubbed 'DeFi United', has garnered support from multiple participants, including staking provider Lido Finance, which has proposed allocating up to 2,500 stETH (worth approximately $5.7 million) to a relief fund.
EtherFi has also proposed a 5,000 ETH plan to 'safeguard users and prevent toxic debt' across DeFi. Aave founder Stani Kulechov has pledged 5,000 ETH, stating that 'Aave is my life's work, and we're working tirelessly to achieve the best possible outcome for users.' The exploit, which occurred due to a vulnerability in KelpDAO's integration with LayerZero, resulted in the attacker minting 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.
This led to impaired collateral, triggering a rush of deposit withdrawals and a $10 billion decline in Aave's total asset value. With an estimated shortfall of over 112,000 rsETH, the DeFi United initiative prioritizes system stabilization through a coordinated bailout, focusing on recapitalizing rsETH and mitigating losses rather than recovering the stolen funds.