The Mantle community has approved a proposal to provide a loan facility of up to 30,000 Ether (approximately $68 million) to Aave DAO. This initiative aims to help compensate for the bad debt resulting from the rsETH exploit that struck Aave in April. The loan, introduced by the Mantle Foundation, was ratified through a week-long vote on the Snapshot platform.
rsETH exploit sparks liquidity emergency
In April 2024, an attacker exploited Aave V3 by depositing 89,567 unsecured rsETH and borrowing around $190 million in WETH, wstETH, and stablecoins. This attack left Aave with a projected bad debt ranging between $123.7 million and $230.1 million, severely straining the protocol’s liquidity framework.
Under the proposal known as MIP-34, which passed on Snapshot, Mantle Foundation is authorized to negotiate and implement the credit agreement with Aave DAO. The loan facility will only take effect once Aave advances its own recovery plan and both parties agree on final terms.
Mantle loan set to ease market pressures
The planned credit will be sourced directly from the Mantle Treasury. This intervention is designed not only to help address the debt created by the rsETH incident but also to reduce broader liquidity stress within Aave. Mantle’s engagement within Aave’s DAO is increasingly seen as a stabilizing force for the protocol’s ecosystem.
According to a recent report by Galaxy Research, the rsETH exploit caused unexpected strain in Aave’s Wrapped Ether (WETH) market. The report notes that after the exploit, WETH utilization rates remained above 99% for 12.7 consecutive days, indicating persistent high demand for borrowed assets.
Galaxy Research observed that, “During the analysis period, WETH utilization stayed structurally elevated, nearly reaching 100%. The average was 99.6%, and even at the end of our review, it had only dropped to 98.47%.”
Liquidity crunch and shifting market conditions
Sustained high utilization rates on the platform meant that nearly all available WETH was being borrowed, leaving minimal liquidity to handle sudden withdrawals. Galaxy states that WETH supply shrank faster than outstanding loans, so even after the initial shock, market strain continued to linger.
Nevertheless, recent data suggests a partial recovery from the previous crisis levels. Updated figures show that, in Aave’s Ethereum V3 WETH market, the utilization rate has eased to 91.6%, with 2.02 million WETH deposited and 1.85 million WETH borrowed from the system.
The approval of Mantle’s credit line marks a significant step for both communities. By extending this credit, Mantle is actively participating in helping Aave contain and manage the aftershocks of the rsETH exploit.
Looking ahead, the actual implementation of the 30,000 ETH loan now hinges on ongoing negotiations and the finalization of conditions between the two DAOs. Both sides are expected to coordinate closely to ensure that the facility is triggered under mutually agreed safeguards.
Market observers are keeping a close watch on the situation, with some analysts speculating that if the credit is deployed effectively, it could help restore confidence and accelerate normalization in Aave’s liquidity pools.
For Mantle, the move underscores its expanding influence in DeFi governance. It demonstrates how cross-DAO collaboration can serve as a mechanism for crisis response in decentralized finance ecosystems.
As both Mantle and Aave focus on stabilizing operations, the crypto community awaits further developments, conscious that such alliances could become a model for managing systemic risks in DeFi going forward.
