The $290 Million Deficit: A Three-Way Game Between Aave, L0, and Kelp—Who Should Foot the Bill?
An incident involving the theft of 116,500 rsETH (worth approximately $290 million) from Kelp DAO’s cross-chain bridge contract has triggered a complex dispute over responsibility and compensation among Kelp DAO, LayerZero, and Aave.
The attack occurred due to a compromised RPC provider used by LayerZero’s Decentralized Verifier Network (DVN). Since Kelp DAO’s bridge used a 1/1 DVN configuration—a single point of failure—the attacker successfully forged a cross-chain message, leading to the unauthorized release of rsETH tokens from the mainnet. These genuine tokens were then deposited into Aave and other lending platforms to borrow WETH, enabling the attacker to exit with the funds.
Responsibility is attributed primarily to Kelp DAO for its risky 1/1 DVN setup. LayerZero bears secondary responsibility for permitting such a vulnerable configuration in its protocol layer. Aave also shares indirect blame for over-collateralizing rsETH and other Liquid Restaking Token (LRT) assets without adequate ongoing risk oversight.
Kelp DAO lacks sufficient funds to cover the loss, shifting focus to the deeper-pocketed players: LayerZero, whose cross-chain ecosystem and reputation are at risk, and Aave, which faces massive bad loans and declining Total Value Locked (TVL).
Aave has asserted that mainnet rsETH remains fully backed, implying it expects Kelp DAO to allow redemption of underlying ETH. This approach would preserve Aave’s mainnet positions but invalidate Layer2 rsETH, damaging LayerZero’s cross-chain credibility.
Potential solutions include:
- A universal 18.5% haircut on all rsETH holders, causing significant Aave bad debt.
- Writing off Layer2 rsETH entirely, protecting Aave mainnet but harming LayerZero and Kelp DAO.
- Negotiating a bounty with the hacker for partial fund return.
- A joint bailout, possibly led by LayerZero’s ecosystem fund, given its long-term stake in the cross-chain ecosystem.
The situation remains unresolved as the parties negotiate, but prolonged delay risks broader DeFi instability, including potential liquidity crises and loss of confidence in LRT and cross-chain infrastructures.
Odaily星球日报04/20 08:52