Aave Proposes 25,000 ETH Contribution to Help Cover Kelp DAO Exploit Losses

Aave Governance Proposal Targets Kelp DAO Exploit Recovery

A governance proposal within Aave suggests contributing 25,000 ETH, valued at nearly $58 million, to the DeFi United recovery initiative following the recent Kelp DAO exploit. The proposal aims to restore backing for rsETH after attackers minted unbacked tokens through a compromised LayerZero bridge.

The attacker used the unbacked rsETH as collateral on Aave to borrow legitimate assets, leaving the protocol with significant bad debt. The proposed funding would help close the remaining deficit created by the exploit and stabilize affected positions across the ecosystem.

Ecosystem Contributions Strengthen DeFi United Relief Effort

Other major protocols and contributors have pledged support to the DeFi United fund. Lido DAO proposed up to 2,500 ETH, while Ether.fi committed as much as 5,000 ETH. Individual contributions also emerged, with Emilio Frangella pledging 500 ETH and Aave founder Stani Kulechov committing 5,000 ETH, calling the protocol his “life’s work.”

Additionally, Mantle proposed a low interest credit facility of up to 30,000 ETH to assist Aave in covering any remaining obligations. Including support from groups such as Golem and BGD Labs, total pledged funds have reached about 69,534 ETH, valued near $161 million. Around 30,700 ETH tied to the attack was also frozen on Arbitrum, further helping offset losses.

X user DCF GOD estimates the hole has been filled;

The incident comes during a broader slowdown in decentralized finance activity. Total value locked across DeFi protocols now stands slightly above $80 billion, representing a drop of more than 27% from approximately $110 billion at the start of the year. Analysts at JPMorgan noted that repeated security incidents are weighing on institutional confidence and pushing some investors toward stablecoin holdings as a safer alternative.

Disclaimer

This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.