Crypto Coalition Unveils Plan to Mitigate Aave Token Exploit

The unprecedented hack has prompted a concerted effort to devise a repair plan. DeFi United, a coalition of multiple blockchain projects and crypto ecosystem individuals, has put forth a detailed proposal to restore the backing of rsETH following the Kelp DAO breach. This proposal outlines a step-by-step approach to utilize Aave's infrastructure and stabilize the markets. The incident occurred on April 18 when an attacker exploited a vulnerability in rsETH's bridge, resulting in the release of 116,500 rsETH without proper backing. These tokens were then dispersed across multiple wallets and utilized as collateral on various lending platforms, including Aave. The proposal aims to address two primary issues: re-establishing the backing of rsETH and unwinding the loans created using the exploited tokens. DeFi United has secured sufficient ETH commitments to re-collateralize rsETH and plans to reintroduce this ETH into the system in stages. Concurrently, the plan involves carefully unwinding the mess in the lending markets by temporarily adjusting the valuation of rsETH within the system. This will enable the liquidation or closure of positions that were backed by the exploited tokens, allowing for the recovery of underlying assets like ETH. The proposal estimates that around 13,000 ETH could be freed up from Aave alone. Once the collateral is recovered, it will be converted into ETH to cover the shortfall created by the exploit. The success of this plan hinges on governance approvals across multiple chains, the deployment of committed funds, and the smooth execution of the unwind. If executed as intended, the ultimate goal is to fully restore the backing of rsETH and stabilize the affected markets.