Following last week’s cyberattack on Kelp DAO, the governance team behind the Aave protocol has taken decisive action. Aave proposed to allocate 25,000 ETH—worth approximately $58 million—from its decentralized autonomous organization (DAO) treasury to the joint aid initiative known as DeFi United. This proposal is currently before the Aave community for a vote.
Impact of Kelp DAO attack and DeFi United fund
In the Kelp DAO incident, an attacker exploited a security vulnerability in the LayerZero bridge to mint unsecured rsETH tokens. These tokens were then used as collateral on Aave, allowing the attacker to borrow assets of real value. This breach left Aave facing substantial debt. The incident prompted the launch of DeFi United, a collective rescue effort attracting contributions from leading protocols, companies, and individual investors throughout the decentralized finance sector.
To date, the DeFi United fund has accumulated a total of 69,534 ETH, with contributions from players such as Golem, BGD Labs, and various community members. Valued at roughly $161 million, this pool represents one of the largest recent recovery efforts in the DeFi space.
Widespread support from other protocols
The recovery initiative quickly drew backing beyond Aave itself. Major DeFi platforms like Lido DAO and Ether.fi joined the fundraising campaign. According to statements released on Thursday, Lido DAO pledged up to 2,500 ETH in support, while Ether.fi proposed a 5,000 ETH contribution to the fund.
Aave’s senior executives are also contributing personally. Emilio Frangella, Vice President of Engineering at Aave, announced a donation of 500 ETH from his own holdings. Meanwhile, Aave’s founder and CEO, Stani Kulechov, committed a personal contribution of 5,000 ETH, stating that supporting Aave remains his life’s most significant mission.
“Aave is the work of my life, and I will continue to support it with all my strength to protect it,” Stani Kulechov emphasized in his statement.
Loan proposals and recovery outlook
On Friday, Mantle put forward a proposal to provide Aave with a low-interest loan facility of up to 30,000 ETH to cover any outstanding debt. With approximately 30,700 ETH frozen on Arbitrum since the attack and taking into account all planned contributions, projections suggest that the majority of losses could be mitigated if every proposal is approved.
Crypto commentator DCF GOD, active on X (formerly Twitter), estimated that if all pledges reach completion, Aave might not even need to draw additional credit from Mantle to resolve the deficit.
According to figures compiled by The Block, the total value locked across decentralized finance (DeFi) protocols now stands just above $80 billion. Compared to the $110 billion recorded at the start of the year, this marks a decline of over 27% in sector value.
Leading investment bank JPMorgan notes that these recurring attacks have dampened institutional investor enthusiasm for the DeFi sector, driving many users to move their assets into stablecoins as a defensive measure.
