I am not sure the number you provide are the correct one, check there Aave Governance this is not the same number as you outlined. For WETH it is 77 ETH.
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This proposal is appropriate.
Thereâs no doubt that Umbrella stakers should be prepared to be the frontline of deficit amelioration, thatâs the risk stakers signed up for. However, as this is a fledgeling program in a situation with big future implications, we should point out that the risk stakers signed up for was protection of in-kind same network core assets.
In this current rsETH situation however, there technically isnât bad debt because the rsETH on mainnet is fully backed. If bad debt materializes because rsETH âsocializesâ losses, that is adversarial and exogenous to the risks Umbrella stakers accepted.
While technically Umbrella stakers would still be on the hook, using Umbrella on adversarially created bad debt is against the spirit of Umbrella, which is backstopping systemic protocol insolvency. The Scenario 1 posited is not that, it would be KelpDAOâs GOVERNANCE insolvency following upstream 3rd party failures.
Slashing Umbrella would be tantamount to Aave enjoining guilt and responsibility for a situation Aave had little control over, and absolutely no protocol failures during. Stakers believe in the protocol, and if punished for non-protocol exogenous failures then this program will cease to exist. Umbrella exists to protect Aave users, not enable the market to push undue responsibility on Aave, whose protocol security has been pristine.
Use this pause to assess what Umbrella is actually intended to do.
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Iâm confused on why weth stakers are paused being held responsible ect.
The hack was on rseth and the bad collateral aave holds is rseth. Why is weth umbrella stakers responsible for the bad rseth collateral aave holds. Itâs weird that weth stakers are waiting to see what happens to rseth tokens. Thatâs against the umbrella contract that we agreed to.
Weth stakers are paused bc if they werenât, Umbrella would be automatically slashed when final bad debt accounting settled for core V3. If we argue that Umbrella shouldnât cover this class of damage, or that it should but damage should be reduced to help the program survive, then pausing to give the DAO a chance to backstop losses before they hit Umbrella is proper.
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This isnât a true borrowedâasset deficiency. wETH didnât depeg, fail, or misbehave â the loss came entirely from invalid rsETH collateral created through an external bridge exploit. Umbrella slashing is meant to follow the asset whose risk caused the shortfall, not the asset the attacker happened to borrow. Slashing wETH stakers here would break riskâisolation and punish the wrong group.
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Manually pausing Umbrella renders any subsequent slashing without legal basis. According to the agreement, Umbrella covers realized losses, not unrealized losses.
If a loss is realized within cooldown period(20 days), Umbrella should cover it according to the agreement, this is the stakersâ responsibility. If a loss is not realized within 20 days, the stakers should be able to withdraw their funds after the cooldown period, this is their right.
Both responsibilities and rights are clearly stated in the terms.
The wETH market did not experience a âborrowed asset deficiencyâ in the sense intended by the Umbrella design, because the deficiency was caused by invalid collateral, not by any failure of the wETH market or its stakers. Therefore, wETH stakers should not be slashed.
1. A âborrowed asset deficiencyâ only applies when the borrowed assetâs own market fails
Umbrellaâs slashing logic is built around a simple principle:
If an asset is borrowed and the protocol cannot recover it due to a failure in that assetâs own market, its stakers absorb the loss.
Example
The borrowed asset depegs
The borrowed asset becomes illiquid
The borrowed assetâs oracle fails
The borrowed assetâs risk parameters were misconfigured
None of these happened to wETH.
wETH remained:
fully backed
liquid
correctly priced
functioning normally
So the wETH market did not fail.
2. The deficiency was caused by invalid collateral, not by wETH
The attacker deposited unbacked rsETH created through a bridge exploit.
This means:
The collateral was fake
The borrow was legitimate
The deficiency arose because the collateral evaporated, not because wETH malfunctioned
This is a collateralâside failure, not a borrowedâasset failure.
Umbrellaâs design is explicit:
Slashing is tied to the asset whose risk caused the loss.
3. If wETH stakers are slashed here, the Umbrella model becomes meaningless
If you slash wETH stakers for a collateral failure, you create a dangerous precedent:
Any asset could be used as collateral
If that collateral fails, the borrowed assetâs stakers get slashed
This destroys risk isolation
Stakers would have to underwrite every collateral asset in the protocol
That is the opposite of what Umbrella was designed to do.
4. Borrowedâasset slashing only makes sense when the borrowed assetâs stakers mispriced risk
wETH stakers did not misprice anything.
They did not take on rsETH bridge risk.
They did not vote on rsETH parameters.
They did not underwrite rsETHâs crossâchain security.
Slashing them would be punishing the wrong group.
5. The attackerâs choice to borrow wETH does not make wETH responsible
The attacker could have borrowed:
USDC
wBTC
DAI
or any other liquid asset
The choice of wETH was arbitrary and based on liquidity.
The borrowed asset is not responsible for the collateralâs failure.
Although the Umbrella contract mentions slashing for âborrowed asset deficiency,â this situation does not qualify as such. A borrowedâasset deficiency occurs when the borrowed assetâs own market failsâthrough depeg, illiquidity, oracle malfunction, or mispriced risk. In this case, wETH functioned perfectly. The deficiency arose because the collateral (unbacked rsETH) was invalid due to an external bridge exploit. This is a collateralâside failure, not a borrowedâasset failure. Slashing wETH stakers would violate Umbrellaâs core principle of perâasset risk isolation and would incorrectly punish stakers who did not underwrite rsETH or its bridge risk. Therefore, wETH stakers should not be slashed.
Thank you Aave for at least taking the care and time of thinking this one through
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Each Umbrella deployment protects only the specific asset and network where itâs staked, providing precise risk isolation. The system maintains a 20-day cooldown period and 2-day withdrawal window, consistent with the previous Safety Module.
Straight out of the umbrella contract agreement 
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Just had to get back on here give a proper shout-out to the best team and leadership in all of of finance. The AAVE leadership lead by Stani on X. Instead of getting lawyers and blaming everyone else. He brought everyone together. I got freaking chills!!
DEFI UNITED!!! 
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I canât say the same for AAVE on harmony. We lost all. Even for users who only deposited ONE.
Thanks Aave team and DEFI UNITED!!
Are we as umbrella weth stakers safe?
Is the freeze over?
I have to point out that the âfreezeâ hasnât taken place. This is just an AIP that only executes after it passes an on-chain vote, but I believe thereâs no longer any need to continue pushing this proposal.
I think all WETH Umbrella Stakers should thank Defi United for saving the situation, so once youâre able to withdraw your funds, you might donate some ETH to Defi United to help with the reconstruction.
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