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Ripple CTO Emeritus David Schwartz has warned the decentralized finance (DeFi) sector after a $290 million exploit hit the Kelp DAO ecosystem, arguing that parts of the industry are prioritizing convenience and rapid scaling over robust security.
Schwartz said he evaluated cross-chain systems for Ripple’s upcoming RLUSD stablecoin and found that many bridging schemes were designed with strong protections against attacks of the type that struck Kelp DAO.
“I evaluated a lot of DeFi bridging systems for use by RLUSD. I was almost exclusively focused on the security and risk aspect. One thing I noticed is that most schemes were very well designed and had really strong mechanisms available to protect against exactly the type of attack…”
Despite that, Schwartz noted that bridge providers often recommended bypassing their own strongest security mechanisms, citing the “operational complexity costs” involved.
Over the weekend, an attacker siphoned approximately 116,500 rsETH—roughly $290 million—from the Kelp DAO ecosystem across the Ethereum and Arbitrum networks.
The hack was attributed to a bug stemming from a severe private key compromise on the source chain. The attacker then hijacked a legitimately deployed Kelp DAO peer contract, enabling them to initiate a large withdrawal within minutes.
Schwartz also pointed to the attacker’s initial funding, saying the exploiter’s initial wallets were funded via the cryptocurrency mixing service Tornado Cash.
Schwartz argued that the incident was highly preventable and suggested that the choice to avoid certain security features may have contributed to the outcome.
“I have a funny feeling part of the problem is going to be something like KelpDAO choosing not to use key LayerZero security features out of convenience,” he said.
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