Aave, one of the leading protocols in the decentralized finance industry, announced that it temporarily suspended rsETH reserves in five different networks, following KelpDAO’s $292 million rsETH loss in April. This decision was taken to protect users’ assets and quickly compensate for vulnerabilities in the system.
Effects of KelpDAO attack and Aave’s decision
During the attack on April 18, a total of 116,500 rsETH was stolen from KelpDAO’s cross-chain bridge, which is equivalent to approximately $292 million. This massive loss negatively affected not only KelpDAO, but also a number of DeFi products and lending markets linked to this asset.
Following the attack, the Aave protocol team evaluated all possible scenarios and decided to freeze rsETH reserves on Arbitrum, Base, Mantle, Linea and the Ethereum mainnet. In the statement made by the protocol, it was stated that these measures taken will help recover more funds during the recovery plan.
Aave is known for its experience in decentralized finance. The team that maintains the management of the protocol takes an active role in such crises in the ecosystem.
DeFi cross-protocol solidarity for recovery
Following the incident, Aave’s service providers called on the DeFi community to act together to close the debt crisis and rsETH gap. In particular, major protocols such as Lido and EtherFi participated in the rescue initiative with significant capital and confirmed their contributions through governance votes.
In the proposal submitted by Lido on the management side, titled ‘Lido DAO contribution to the coordinated rsETH recovery initiative’, it was proposed to allocate a maximum of 2,500 stETH one-time from the Lido Labs Foundation’s fund pool. These resources, along with contributions from other stakeholders, will be used solely to reduce the rsETH gap.
EtherFi, on the other hand, held a management vote to allocate a maximum of 5,000 ETH from its own DAO treasury. According to the proposal, these funds will be used with different protocols to compensate for user losses and to prevent bad debt on Aave and other platforms.
In the statement made by EtherFi, “It is time to take action. A big step is coming for the recovery process and positive developments for users will be officially shared very soon.” statements were included.
Once approval is received from the management, the recovery program will be launched immediately and will continue until the total cap of 5,000 ETH is reached or the process is completed, EtherFi stated. If there is any remaining amount from the resources, it will be transferred to the DAO treasury. If additional funds are recovered in the future through guarantee, insurance, legal proceedings or on-chain improvement, they will be evaluated in the treasury.
Rescue plan and industry response
In executive votes, the EtherFi proposal was unanimously approved; A total of 1,800 token holders supported the proposal. This solidarity has attracted great attention in the industry and other protocols are expected to announce their contributions.
The detailed road map for the operation of the improvement process will be announced within 7 days. This plan will include all protocols involved in the recovery, fund distribution methods and implementation details. The implementation is planned to start quickly after approval.
On the other hand, the Ethena protocol also announced that it will support this process. The company stated that its contribution will be towards the process of re-supporting rsETH and developing an orderly solution for stakeholders.
The Aave team announced that new contributions for rescue will be officially announced in the coming days. Officials stated that more updates will be made within the scope of the plan and that the process is approaching completion.
