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Lido Labs has asked the Lido DAO to approve the use of up to 2,500 stETH—worth about $5.8 million—to help reduce an rsETH shortfall linked to the recent Kelp exploit.
The proposal frames the stETH allocation as part of a broader recovery package rather than a full bailout, saying the funds would be used only to help close the rsETH deficit in full.
According to the proposal, “Kelp’s rsETH LayerZero exploit created a material rsETH backing shortfall with broader second-order effects across integrated DeFi venues.” Lido Labs said the situation has put pressure on market rates, lending positions, and vault users.
The request follows a roughly $292 million exploit that hit Kelp DAO’s rsETH bridge last week. The incident triggered stress across connected DeFi platforms and raised concerns about bad debt.
Onchain analysis platform Lookonchain said Aave’s total value locked fell by nearly $8 billion after the attacker used stolen Kelp-linked assets as collateral. Lookonchain also estimated that the incident left about $195 million in bad debt.
Lido Labs said the response should remain “narrow and coordinated,” arguing that inaction would likely increase losses for EarnETH vault depositors and deepen negative spillovers across stETH-linked products and liquidity venues.
Lido Labs said the full deficit is above 100,000 ETH. Because of the size, the proposal expects multiple contributors to participate in the recovery effort.
The proposal states: “Given that the total deficit exceeds 100,000 ETH, this vehicle is expected to include multiple contributors, with Lido DAO participating as one of several stakeholders rather than as the sole backstop provider.”
Other DeFi projects moved toward relief efforts as the incident unfolded. The EtherFi Foundation proposed adding 5,000 ETH for extra support shortly after the Lido DAO proposal appeared.
Aave founder and CEO Stani Kulechov also said he would personally donate 5,000 ETH to Aave’s DeFi United relief fund.
The Kelp exploit has renewed debate about how DeFi platforms manage security failures, liquidity stress, and user losses after major attacks.
Curve founder Michael Egorov said failures tied to centralized points of control hurt an industry aiming to build open financial systems. His comments reflected broader concerns about weak spots in complex DeFi structures.
JPMorgan analysts also said repeated DeFi hacks and slow growth have weakened institutional interest, noting that each exploit can push investors toward holding funds in stablecoins rather than using higher-risk DeFi products.
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