Aave and several DeFi projects are rallying to repair rsETH after a major exploit tied to KelpDAO’s LayerZero bridge on April 18. The attacker minted 116,500 rsETH, used it as collateral on Aave v3 to borrow ETH, staked ETH, and left the protocol with a large bad debt when the position unraveled.
Analysts estimate the original rsETH collateral shortfall at about 163,183 ETH, which is hundreds of millions of dollars, at current prices. The shock stressed Aave’s markets and raised concerns about cross-protocol risk across restaking and lending platforms.
Aave responded by launching “DeFi United,” a coordinated recovery effort that pools contributions from major DeFi protocols, foundations, and individuals. The goal is to restore rsETH’s backing, cover Aave’s bad debt, and stabilize interconnected markets without a disorderly unwind.
So far, contributors have pledged more than 132,623 ETH to the designated recovery address, according to the DeFi United dashboard, totaling over $303 million at current prices, drawn from more than 116,000 wallet addresses across 126,000-plus individual transfers.
Partners include Lido DAO, EtherFi, Mantle, Golem Foundation, and others, all coordinating how pooled funds and credit lines will close the remaining collateral gap.
Aave DAO’s Treasury Role
Within this broader push, Aave DAO has proposed sending 25,000 ETH from its own treasury into the recovery structure. The proposal appears as part of a wider framework that also uses protocol donations, asset freezes, and a credit facility provided by Mantle to manage liquidity and risk.
The estimated deficit has already fallen from about 163,183 ETH to roughly 75,081 ETH after partial recoveries and pledged support. DeFi United now aims to address this remaining shortfall, and Aave’s 25,000 ETH plays a key role in the recapitalization effort.
DeFi United now aims to address this remaining shortfall, and Aave’s 25,000 ETH plays a key role in the recapitalization effort. Aave and partners have asked the Arbitrum DAO to release about 30,765 ETH that the Arbitrum Security Council moved to a safe address during the crisis, so those funds can be included in the structured recovery.
The full plan still needs to move through several governance processes across Aave, Arbitrum, and other DAOs before every pledge turns into on-chain action. If approved and executed, DeFi United aims to restore rsETH’s collateralization, prevent cascading liquidations, and show that large DeFi systems can coordinate during severe stress.
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