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The Mantle network has submitted a draft proposal to extend a credit line to DeFi lending protocol Aave, aiming to address uncollectible positions created after a security breach tied to Kelp DAO’s restaked Ethereum token.
According to the draft outlined by Mantle’s core contributor team, Mantle’s treasury would provide up to 30,000 ETH (about $70–105 million, depending on market prices) as a structured loan facility. The funding is intended specifically to cover losses and shortfalls related to rsETH collateral following the breach.
The proposal traces its rationale to an April 18 bridge exploit affecting Kelp DAO’s LayerZero-powered cross-chain infrastructure. Attackers reportedly siphoned roughly 116,500 rsETH tokens, valued at approximately $292 million at the time.
The stolen rsETH was then deposited as collateral on Aave’s V3 platform. Per the proposal’s description, the perpetrators borrowed large sums of wrapped Ether before the underlying collateral lost its backing.
With the rsETH now unbacked, the associated borrowing positions on Aave became effectively impossible to liquidate through standard mechanisms. The resulting bad debt is estimated at $124 million to $230 million.
Aave moved quickly by freezing the affected rsETH markets to limit further risk, but the incident highlighted vulnerabilities across interconnected DeFi protocols and the need for coordinated support.
Mantle’s offer is framed as a yield-generating credit facility rather than an outright grant. Under the draft terms discussed in MIP-34, the loan would run for three years and carry an interest rate benchmarked to Lido’s staking yield plus a modest premium, with the exact rate to be finalized through governance.
The draft also states that repayment could occur early without penalty. The facility would be secured by AAVE governance tokens and a portion of the protocol’s future revenue streams.
Proceeds would be ring-fenced exclusively for addressing the rsETH shortfall, with the intent of targeted relief without broader dilution of Aave’s treasury.
The proposal is part of a wider “DeFi United” coalition. The content notes that multiple protocols and foundations—including EtherFi, the Golem Foundation, and Aave founder Stani Kulechov—have pledged additional ETH to help restore stability.
Collectively, commitments have surpassed 43,000 ETH, reflecting cross-project support in the aftermath of the breach.
For Mantle, the move is described as both a way to deploy otherwise idle treasury assets productively and a means to deepen ecosystem partnerships.
More broadly, the development underscores themes in DeFi around cross-chain bridge fragility, collateral failure cascades, and the ability of communities to respond quickly and collaboratively.
As governance discussions proceed on the Mantle forum, the proposal could influence how layer-2 networks and lending platforms coordinate during crises. Final approval would depend on community votes and the precise bad-debt calculations, with the coming days determining whether the credit facility closes the gap or leads to further coordinated action.
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