Last month’s high-profile Kelp DAO hack sent shockwaves through the decentralized finance (DeFi) sector, highlighting vulnerabilities across major blockchain platforms. In the wake of the attack, a coalition known as DeFi United—bringing together leading blockchain projects and industry representatives—stepped up to coordinate the recovery. From day one, the scale of the losses has been transparently tracked, and this week, a detailed rescue plan was made public to restore confidence and stability.
How the crisis unfolded
On April 18, hackers exploited a vulnerability in the rsETH bridge, tricking the Ethereum side of the protocol to release a total of 116,500 rsETH. These tokens were effectively created out of thin air and dispersed across multiple wallets, then funneled into a range of DeFi applications. Notably, a large portion was used as collateral on top lending platforms such as Aave and Compound, intensifying the repercussions.
This incident disrupted not only token reserves but also core operations of key protocols. For a brief period, giants like Aave accepted rsETH as collateral, unaware that the tokens lacked real backing. Approximately 107,000 of the exploited 116,500 rsETH remain active within loan positions on Aave and Compound, demonstrating the hack’s continuing impact on these systems.
DeFi United’s multi-pronged solution
To address the $300 million deficit sparked by the breach, DeFi United has proposed a recovery plan centered on two main goals: reinstating full backing for rsETH and safely closing compromised credit positions opened with suspicious collateral.
As a first step, community members have committed to supplying the necessary amount of ETH as new collateral in the system. This ETH will be converted to rsETH in stages and reintegrated into the protocol, aiming to eliminate the token shortfall completely.
The most visible challenge is unwinding the credit positions initiated by the attacker. The plan prioritizes an orderly closure of these loans, rather than leaving their fate to the whims of the market, ultimately seeking to minimize potential collateral losses.
The plan’s central promise is explicit: “Full backing for rsETH will be restored and stability will be achieved across all affected markets.”
Exiting problematic positions via technical measures
The rescue proposal involves temporarily adjusting how rsETH is valued within the system, reducing volatility as the bad debts are resolved. By slowly winding down positions of unknown origin, the aim is to recover up to 13,000 ETH from Aave, directly supporting reserve replenishment.
Any recovered ETH is set to be re-allocated to address the overall token deficit, plugging on-chain financial gaps. Still, the plan’s architects caution that the process holds inherent risks. Because the roadmap relies on voting and cooperation across multiple blockchain communities, sustained consensus will be critical for success.
If executed as intended, the plan could mark a milestone in DeFi collaboration, offering a template for future crisis response efforts. Stakeholders hope this unprecedented level of coordination will lay the groundwork for long-term stability across decentralized markets.
