Aave, one of the leading protocols in the decentralized finance sector, has temporarily frozen its rsETH reserves across five different networks following the $292 million rsETH loss suffered by KelpDAO in April. The move was taken swiftly to protect users’ assets and address vulnerabilities in the system.
Impact of KelpDAO hack and Aave’s response
On April 18, an exploit on KelpDAO’s cross-chain bridge resulted in the theft of 116,500 rsETH, which was valued at approximately $292 million. The scale of the attack not only hit KelpDAO but also negatively affected a range of DeFi products and lending markets tied to this asset.
In response to the breach, the Aave protocol team assessed all available scenarios and decided to freeze rsETH reserves on the Arbitrum, Base, Mantle, Linea, and main Ethereum networks. The team stated that these urgent steps would help maximize the recovery of funds throughout the ongoing rescue process.
With its extensive experience in decentralized finance, Aave’s core team regularly plays a proactive role whenever crises disrupt the ecosystem. This latest intervention underscores their commitment to security and operational continuity.
DeFi protocol alliance for recovery
Following the incident, service providers working with Aave called on the DeFi community to unite in tackling both the debt crisis and the rsETH shortfall. Major protocols such as Lido and EtherFi stepped in, backing the recovery with substantial capital and governance approvals.
Lido proposed allocating up to 2,500 stETH from the Lido Labs Foundation treasury as a one-time contribution. These funds will be directed exclusively to reducing the rsETH shortfall, alongside contributions from other stakeholders involved in the rescue plan.
EtherFi, for its part, held a governance vote to commit up to 5,000 ETH from its DAO treasury. If approved, these resources will be used both for compensating user losses and for stabilizing debt across Aave and other platforms, in partnership with multiple protocols.
EtherFi’s team declared, “Now is the time to act. A major step is coming for the rescue process, and positive developments for users will be shared officially very soon.”
Upon governance approval, EtherFi will launch the recovery program immediately, with allocations continuing until the 5,000 ETH cap is reached or the process concludes. Any unused portion will be returned to the DAO treasury, and any further recovered funds from collateral, insurance, or legal action will also be managed by the treasury.
Recovery plan roadmap and industry reaction
EtherFi’s recovery proposal received unanimous support during the governance vote, with a total of 1,800 token holders in favor. This show of solidarity attracted widespread attention, and other protocols are expected to announce their own participation.
A detailed roadmap for the recovery process will be released within seven days, outlining which protocols are engaged, how funds will be distributed, and specific implementation steps. The plan is expected to enter the execution phase swiftly once approved.
Meanwhile, Ethena protocol has also committed to supporting the recovery. The organization stated that its contribution would focus on reinstating rsETH as a credible asset and on creating a sustainable solution for all affected stakeholders.
Aave’s team emphasized that further contributions to the rescue effort will be formally announced in the coming days. Officials stated that frequent updates will be provided as the process edges closer to completion.
