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On Friday, Aave’s service providers submitted a governance proposal seeking authorization to transfer 25,000 ETH—valued at approximately $58 million—from the protocol’s treasury to the DeFi United recovery initiative. The contribution is intended to fully back rsETH following a security breach at Kelp DAO last week.
Aave DAO published an ARFC proposal to join the DeFi United recovery effort after the April 18, 2026 Kelp rsETH bridge incident. The initial shortfall was about 163,183 ETH, later reduced to approximately 118,400 ETH based on a tracking tool circulated on X.
The security incident occurred on April 18, when a malicious actor exploited a critical vulnerability in the Ethereum LayerZero bridge adapter used by Kelp. The breach led to the extraction of 152,577 rsETH tokens, creating an initial deficit of approximately 163,183 ETH. The attacker then deposited the unbacked rsETH as collateral on Aave, borrowing legitimate assets and generating bad debt for the platform.
While the proposal is awaiting a formal governance vote, it has drawn broad support across the DeFi ecosystem.
Mantle introduced a separate proposal for a low-interest credit facility offering up to 30,000 ETH, intended to help Aave manage any residual bad debt not covered by donated funds.
In addition, approximately 30,700 ETH was immobilized on Arbitrum after the attack, which factors into the overall recovery calculations.
According to an X tracking tool, the actual rsETH shortfall is 112,204 rsETH, equivalent to roughly 118,400 ETH. A user identified as DCF GOD calculated that the shortfall appears to be covered if all pending governance proposals are approved. Under that scenario, Aave may not need the full amount of Mantle’s credit facility.
The DeFi United recovery fund currently holds approximately 69,534 ETH, which is nearly $161 million when accounting for pledged and proposed allocations.
Data from The Block shows total value locked (TVL) across DeFi protocols is just above $80 billion. This is a decline of more than 27% from roughly $110 billion at the beginning of 2026.
JPMorgan analysts said recurring security exploits are reducing institutional appetite for DeFi, with some market participants shifting capital into stablecoins.
The Aave governance vote on the 25,000 ETH allocation remains pending. Similarly, all other proposed contributions are awaiting final ratification through their respective protocol governance processes.
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