Aave, a leading lending platform, has successfully raised approximately $160 million towards covering the $200 million in bad debt resulting from the largest DeFi exploit of the year, as reported by Arkham on Saturday. The blockchain analytics platform stated, "To date, AAVE has raised $160M to cover the bad debt from the Kelp DAO Exploit, at defiunited.eth. Notably, the largest contributors are Mantle and AAVE DAO, who together have contributed 55,000 ETH, equivalent to $127M." This development follows last week's announcement by Aave and several prominent crypto firms regarding a coordinated recovery plan aimed at stabilizing DeFi markets, which were severely impacted by a $292 million security breach.
The initiative, known as DeFi United and led by Aave service providers, seeks to restore support for rsETH, the yield-bearing derivative token of ether (ETH) that was at the center of the exploit. Aave's founder, Stani Kulecho, has personally pledged 5,000 ETH to DeFi United, valued at approximately $11,730,000 at the current ether price of roughly $2,346. The exploit, which originated from a vulnerability in KelpDAO's integration with LayerZero, allowed an attacker to mint 116,500 unbacked rsETH tokens, resulting in impaired collateral for Aave and triggering a massive withdrawal of $10 billion by lenders.
The primary objective of the fundraising effort is to stabilize the system through a coordinated bailout, aimed at recapitalizing rsETH and mitigating losses. This incident is preceded by the second-largest exploit of the year, which occurred in late March, where an attacker exploited the 'durable nonces' feature of the Drift Protocol on Solana, draining at least $270 million without exploiting a code bug or using stolen keys.