The Mantle community has approved a new proposal to open a loan of up to 30,000 Ether (approximately $68 million) on the Aave DAO to help offset the bad debt caused by April’s rsETH abuse. This loan facility, proposed by the Mantle Foundation, was accepted after seven days of voting on the Snapshot platform.
rsETH-induced crisis and emergency loan step in Aave
In the rsETH exploit that occurred in April 2024, an attacker deposited 89,567 unsecured rsETH on Aave V3 and borrowed approximately $190 million worth of WETH, wstETH and stablecoins in return. This transaction created potential bad debt at Aave ranging from $123.7 million to $230.1 million. This shock created serious stress in Aave’s liquidity structure.
Under the MIP-34 proposal accepted on the Snapshot platform, Mantle Foundation was authorized to negotiate and implement the loan agreement with Aave DAO. In order for the credit facility to become active, Aave is expected to make progress in its own recovery plan and the final terms of the agreement will be determined.
Credit facility aims to relieve pressure on the market
The loan provided by Mantle will come directly from the Aave Treasury. This initiative will not only alleviate the debt caused by the rsETH incident; It also stands out as a step to reduce the general liquidity pressure on Aave. Mantle’s presence in the DAO played an important role in maintaining the stability of the protocol ecosystem.
According to the report published by Galaxy Research, there was more pressure than expected in the Wrapped Ether (WETH) market on Aave after rsETH abuse. The report stated that after the abuse, the WETH usage rate remained above 99 percent for 12.7 days.
“During the analysis period, the WETH usage rate remained structurally high and remained close to 100 percent; the average was at 99.6 percent, and even at the end of the analysis it only decreased to 98.47 percent,” Galaxy Research was quoted as saying.
Liquidity crisis and current market situation
The fact that the usage rate on the cryptocurrency platform is so high means that almost all of the assets provided in the market are borrowed and the liquidity remaining against sudden withdrawal requests is quite limited. According to Galaxy, the market strain continued even after the initial shock wore off, as WETH supply declined faster than the reduction in debt.
However, the situation appears to have returned somewhat to normal from the peak levels quoted in Galaxy’s analysis. Latest data showed that Aave’s Ethereum V3 WETH market had a usage rate of 91.6 percent, with 2.02 million WETH deposited into the system and 1.85 million WETH withdrawn as debit.
