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Aave and a coalition of DeFi protocols are mobilizing a coordinated recovery effort branded “DeFi United” to absorb bad debt stemming from the April 18 exploit that drained $292 million from KelpDAO’s cross-chain bridge. The sector’s largest lending protocol, Aave, is facing an estimated $123.7 million to $230.1 million shortfall.
Aave founder Stani Kulechov kicked off the push on Wednesday with a personal pledge of 5,000 ETH.
“Aave is my life's work and we're working nonstop to find the best possible outcome for users… I'm personally contributing 5,000 ETH to DeFi United as we continue working together with partners on formalizing more commitments.”
Ethereum layer-2 scaling solution Mantle has drafted a proposal, MIP-34, for a credit facility of up to 30,000 ETH. The loan to Aave DAO would carry interest at Lido’s rate plus 1% and be repayable over up to 36 months.
Bybit co-founder Ben Zhou said the exchange, as Mantle’s biggest stakeholder, will vote yes.
“Bybit, as the biggest holder and supporter of Mantle, will vote YES for this proposal.”
Lido Finance’s contributors proposed a one-time contribution of up to 2,500 stETH, conditioned on the relief vehicle being fully funded. They warned that a partial recovery would leave EarnETH vault depositors exposed to losses of up to 9,000 ETH.
Other participants announced or signaled involvement, including:
On Wednesday, Circle’s chief economist Gordon Liao proposed raising Aave’s USDC borrowing cap to 50% from 14% to break a liquidity freeze. The idea was amplified by CEO Jeremy Allaire, but some governance participants criticized it, warning it could trigger liquidations.
The KelpDAO exploit, attributed to North Korean hackers, involved a configuration vulnerability in Kelp’s LayerZero bridge. A single-verifier setup enabled unauthorized minting of 116,500 rsETH, which attackers then used as collateral on Aave to borrow roughly $190 million in legitimate assets.
The resulting liquidity crunch triggered more than $10 billion in net withdrawals from Aave. Later, the Arbitrum Security Council froze 30,766 ETH worth $71.5 million linked to the exploiter following law enforcement input.
The coordinated response has prompted cautious optimism alongside structural skepticism from experts.
Matthew Pinnock, COO at Altura DeFi, said the effort indicates the ecosystem is “moving beyond isolated protocols to a more coordinated financial system,” while stopping short of calling it a template. He emphasized that socialized recovery methods matter in a crisis, but that the focus should remain on clear rules and accountability.
Georgii Verbitskii, founder of yield platform TYMIO, said there are still “very few concrete details” beyond initial funding and indications of coordination. He argued that without clarity on what the initiative will actually involve, it is difficult to expect a meaningful structural shift in DeFi. He also suggested the market may move toward more conservative, base-layer configurations as investors reassess the risks of chasing incremental yield, potentially reducing demand for wrapped products and liquid staking derivatives.
Others framed the response as evidence of DeFi’s resilience. Sergey Kravtsov, CEO of Papaya Finance, described the coordinated effort as “an emergent immune response of a financial system that is actually decentralized,” adding that competing protocols stepped in voluntarily because allowing bad debt to cascade would have harmed everyone.
On remediation, Pinnock said the industry is likely to move toward “standardised collateral onboarding frameworks” that require independent attestation of backing. He added that verification standards need to be enforced from onboarding onward to be effective, rather than being discovered only after failures occur.
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