Aave records $6 billion TVL drop as Kelp hack exposes structural risk at DeFi lender

Aave experienced a significant $6.6 billion drop in its Total Value Locked (TVL), falling from $26.4 billion to nearly $20 billion, following an exploit on the Kelp decentralized finance (DeFi) protocol. Attackers drained 116,500 rsETH, a liquid restaking token, from Kelp's bridge and used it as collateral on Aave V3 to borrow wrapped ether, creating an estimated $196 million in bad debt for Aave. This event caused the AAVE token to fall 16% and led to a surge in daily fees as liquidations occurred. The incident highlights structural risks within DeFi lending protocols, particularly concerning the collateralization of liquid restaking tokens and the reliance on cross-chain bridges, even when the lending protocol itself is not directly hacked. Aave's founder confirmed the protocol's contracts were not compromised, but the reliance on external collateral whose backing was compromised exposed vulnerabilities, leading to depositor flight and questioning the adequacy of reserve mechanisms.

(Source：CoinDesk)