Aave, a lending platform, has successfully raised approximately $160 million to address 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, 'So far, AAVE has raised $160M to cover the bad debt from the Kelp DAO Exploit, at defiunited.eth. The largest contributors, Mantle and AAVE DAO, have together raised 55,000 ETH, valued at $127M.' Following a $292 million security breach that left the crypto borrowing sector's largest lender facing a financial crisis, Aave and major crypto firms announced 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 core of the exploit. Aave founder Stani Kulecho stated, 'I'm personally contributing 5,000 ETH to DeFi United as we continue working together with partners.' With ether's current price of roughly $2,346, his personal contribution is worth $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, leaving Aave with impaired collateral and triggering a run on deposits as lenders rushed to exit, ultimately withdrawing $10 billion.
The effort to eliminate the bad debt focuses on stabilizing the system through a coordinated bailout to recapitalize rsETH and mitigate 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,' rather than leveraging a code bug or stolen keys.