Aave Proposes 25,000 ETH Donation to Cover Kelp DAO Exploit Losses
Aave has submitted a governance proposal to contribute 25,000 ETH (nearly $58 million) from its DAO treasury to the DeFi United relief fund. This move aims to restore full backing for rsETH after last week’s Kelp DAO exploit.
Quick Summary
- Multiple DeFi protocols and users have pledged enough funds to cover the exploit losses.
- Total Value Locked (TVL) in DeFi has dropped nearly 30% year-to-date and now stands just above $80 billion.
What Happened in the Kelp DAO Exploit
An attacker used a compromised LayerZero bridge to mint unbacked rsETH. They then used this fake collateral on Aave to borrow real assets, creating significant bad debt for the protocol.
Aave’s Proposed Contribution
On Friday, Aave service providers put forward a proposal to send 25,000 ETH to DeFi United. The fund will help close the remaining shortfall and protect users who hold rsETH.
Aave’s Senior VP of Engineering, Emilio Frangella, plans to personally donate 500 ETH. Founder and CEO Stani Kulechov is contributing 5,000 ETH, calling Aave his “life’s work.”
Growing Support from DeFi Ecosystem
Several other major players have already stepped up:
- Lido DAO: Up to 2,500 ETH
- Ether.fi: Up to 5,000 ETH
- Mantle: Low-interest credit facility of up to 30,000 ETH
With donations from Golem, BGD Labs, and individual users, the DeFi United fund has reached approximately 69,534 ETH (around $161 million).
Current Status of the Exploit Hole
According to X user DCF GOD, the combination of all proposed contributions plus the freezing of 30,700 ETH on Arbitrum has likely filled the entire shortfall — assuming all proposals pass. This may reduce or eliminate Aave’s need to borrow from Mantle.
DeFi TVL Continues to Decline
DeFi’s total value locked has fallen from $110 billion at the start of the year to just above $80 billion, a drop of over 27%.
Analysts at JPMorgan note that repeated exploits are hurting institutional confidence in DeFi and pushing users toward stablecoins.
