The largest decentralized finance (DeFi) exploit of the year reportedly left Aave with a bad debt of $200 million; the platform has raised around $160 million to pay it off, according to a Saturday post by Arkham on X.
Arkham stated:
“AAVE have so far raised $160M to cover the bad debt from the Kelp DAO Exploit, at defiunited.eth. The largest contributors are Mantle and AAVE DAO, who together raised 55,000 ETH or $127M.”
Last week, Aave, the largest crypto lending protocol in the sector, and other organizations launched a collaborative recovery effort to stabilize the DeFi markets in the aftermath of a terrible security incident that exposed $292 million. Restoring support for rsETH, the core yield-bearing derivative token of ether (ETH), is the goal of the DeFi United effort, spearheaded by the Aave service providers.
Eradicating Bad Debt
With the announcement that he would be providing 5,000 ETH to DeFi United, Stani Kulecho, Creator of Aave, aims to fortify their bonds. With the current price of around $2,346 per ether, his personal contribution is worth $11,730,000.
Something went wrong with the integration of KelpDAO and LayerZero, and someone created 116,500 rsETH tokens without backing them up. A run on deposits of $10 billion occurred when lenders departed Aave, leaving the firm with flawed collateral. The main objective of the effort to eradicate bad debt is to stabilize the system via a coordinated rescue that recapitalizes rsETH and limits losses.
As of the end of March, the second-biggest vulnerability this year has been exploited when hackers stole $270 million from the Drift Protocol on Solana. They accomplished this by abusing a legitimate feature known as “durable nonces,” rather than a code error or stolen keys.