Aave Pitches Two Solutions to Resolve Kelp DAO Hack Dilemma

Aave's risk management provider, LlamaRisk, has modeled two scenarios for addressing the bad debt resulting from the Kelp DAO exploit, where hackers stole $293 million in rsETH tokens and used them as collateral on Aave V3. The first scenario distributes the estimated $123.7 million in bad debt across all rsETH token holders on Ethereum mainnet and Layer 2s, potentially causing a 15% depeg of rsETH. In this scenario, Aave's Umbrella security model could cover losses in wrapped Ether (wETH). The second scenario shifts the entire shortfall of $230.1 million to Ethereum Layer 2 networks like Arbitrum and Mantle. Aave has approximately $181 million in its treasury that could be used to cover potential shortfalls. Kelp DAO is still assessing the financial impact and working with Aave and other stakeholders on a resolution. The exploit involved compromised LayerZero bridge nodes and a DDoS attack, leading to the minting of fraudulent rsETH tokens.

(Source：Cointelegraph)