Aave Unveils Plan to Restore $246M in Funding After Kelp DAO Attack
Aave outlines a strategy to restore backing for rsETH following a $246 million deficit caused by the Kelp DAO hack, according to DL News. The proposal aims to fully reimburse affected users while managing associated risks, including governance hurdles and potential hacker interference.
Aave has announced a plan addressing the $246 million shortfall resulting from the Kelp DAO hack, which saw North Korean attackers exploit the protocol to siphon funds. Following the attack on April 18, 2023, where $293 million was stolen by abusing unbacked rsETH tokens, Aave, along with the DeFi United coalition, aims to restore full backing for rsETH without distributing losses among users.
According to Aave, “DeFi United has secured sufficient ETH commitments to restore full backing.” The strategy involves converting committed Ether into rsETH in multiple phases, ensuring that every rsETH token in circulation is fully collateralized by real Ether. Additionally, to mitigate the hacker's ongoing positions on Aave and Compound, the protocols plan to liquidate the bad debt through controlled measures, including adjusting the oracle price of rsETH via governance votes. Oracles provide critical price data that decentralized finance (DeFi) protocols rely on to maintain healthy lending positions.
However, the restoration plan carries significant mitigation risks. Aave cautions that successful implementation depends on governance proposals being approved and executed properly on Ethereum and Arbitrum, a layer 2 blockchain. The potential for interference from the hacker adds another layer of complexity as they may attempt to obstruct recovery efforts.
Aave Labs CEO Stani Kulechov confirmed that the execution of the recovery plan is set to begin shortly. The Kelp DAO incident is part of a larger trend of high-profile crypto thefts, raising questions about the inherent risks associated with decentralized technology.
The crypto community continues to watch how this plan unfolds, especially in light of the challenges posed by governance votes and the possibility of further hacker intervention. Aave, along with DeFi United, remains focused on restoring user confidence and stabilizing the DeFi ecosystem.
Summary based on original reporting by Tim Craig at DL News, originally published Apr 28, 2026. SolanaWire does not republish source content.
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