Can someone please tell me where I can find these “transparent updates”? I am not finding any communication from Aave - thanks for help
What limit price did you use?
When the Kelp DAO news first broke, the panic was deafening. But looking at the hard on-chain data, I am completely convinced: this incident is absolutely manageable.
The reality is that the attacker’s position is overcollateralized. We are dealing with a complex illiquidity issue, not a fatal protocol bankruptcy. If the DAO handles the unwinding wisely, we will navigate this safely.
More importantly, this is the ultimate catalyst for evolution. Aave must massively revise its security framework regarding Liquid Restaking Tokens (LRTs). Layered restaking risks and bridge configurations can no longer be given the same 93% E-Mode leniency as base-layer assets.
Handled correctly, Aave’s future is as bright—or brighter—than ever before.
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PS: If the market gates were simply opened today, the attacker could theoretically borrow more against that collateral. At an absolute minimum, Aave governance must immediately step in to block the attacker’s account.
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Look at your earlier comments, you’re so desperate trying to protect your umbrella fund that you deposited to receive a higher interest. But let me be blunt, what you said doesn’t make sense and AAVE will only have a more severe PR issue and lose more trust if they do what you said, because obviously the exploit happened on both Ethereum and Arbitrum with even more WETH withdrawn from exploited rsETH collateral on Ethereum(core), not only on L2s.
And by dodging the responsibility the way you described, people would no longer trust AAVE and make this as a bad precedent to show that AAVE is not trustworthy and thus AAVE would lose more TVL in the future. Grow up and take the responsibility. I know it is a hard situation, but maybe can stay silent instead of being so manipulative? This kind of manipulative comment to protect your bag only makes things more disgusting.
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I was able to get out of my base eth exposure on aave using cow limit order at about 1% discount. Happy to pay it to be out. Still stuck in Arbitrum, but base was my biggest position. Thanks man. I really appreciate it.
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Yess! So glad it helped you. Try the same on ARB, place a limit and let it run.
I’ve backed Aave since its inception. Every token I’ve held has either been lent, staked in the Safety Module, or moved into Umbrella when it launched. I am gutted that we’re in this position because of a protocol we never dealt with that had terrible security practices on their bridge, and now the people who funded Aave’s insurance layer are staring down the barrel.
The bad debt is real and it’s on mainnet, I’m not pretending otherwise. But liquidating the Umbrella vault to cover it would be a mistake when there is a clear path to making Aave whole without touching Umbrella or the DAO treasury at all.
Kelp still holds roughly 630K ETH in their restaking contracts. Aave’s mainnet bad debt is around 53K WETH. That is less than 9% of Kelp’s reserves. Aave Labs should be talking to Kelp right now to get a direct redemption of the rsETH collateral sitting in Aave’s contracts. If Kelp honours that redemption, Aave is made whole. The remaining rsETH holders take a haircut of roughly 17% instead of 16% after socialisation. That is a rounding error for them, and those holders chose to deposit their ETH with Kelp knowing full well what the protocol was. Aave users never made that choice.
It punishes the wrong people while protecting the people closest to the problem. rsETH is Kelp’s product. Kelp’s bridge was the vulnerability. Anyone holding rsETH accepted Kelp counterparty risk by holding that token. Umbrella stakers never made that choice. We backstopped Aave’s WETH market, we didn’t interact with Kelp, we didn’t opt into bridge risk. Wiping out Umbrella to make rsETH holders whole has the liability chain completely backwards. You’d be destroying the insurance of people who had nothing to do with this to compensate holders of the asset that caused it. Meanwhile Kelp still has more than enough ETH to cover Aave’s exposure and the risk providers who recommended the January E-Mode change that compressed the safety buffer from 28% to 7% haven’t been held to account either.
The recovery should follow the liability chain. Kelp redemption of Aave’s rsETH collateral first, legal pressure second, DAO treasury if absolutely needed. Umbrella exists to cover protocol and market risk, not to be a slush fund for third party infrastructure negligence. If stakers get slashed for this, the precedent is set: your insurance can be taken to pay for someone else’s broken bridge. Nobody restakes after that.
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Sounds like you’re threatening that nobody would stake again, but it’s not a risk if the fund is functioning as intended. It is more of a risk if you have 50M+ umbrella stakes but denying the accountability! That equals to nothing and undermines the trust!
Also, why would rsETH prioritize AAVE to make AAVE whole but throw everyone else under the bus when the exploit was mainly targeting AAVE? Again I understand it is a hard time and your stakes in umbrella fund is at risk, but how dare you prepare a plan to throw everyone else under the bus and prioritize your own funds?
Umbrella funds are there to protect the exact collatorazation issues happening here, you get a higher interest and you take the accountability. Yeah, it is something wrong that Kelp should be liable, but umbrella funds should be slashed to cover the loss and then pursue legal actions to Kelp to recover their loss
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Currently, the max LTV for WETH on Core Instance is set to 0, which prevents me from collateralising my WETH position with other tokens. Frankly, I fail to see the rationale behind preventing users from protecting their positions with other assets. This appears arbitrary and unfair, especially considering that other ETH-based tokens, such as wstETH, have not been subject to the same treatment.
I am unsure if this is the intended effect of the freeze, but I would appreciate an explanation of its added value, given that the 100% utilisation rate already naturally restricts withdrawals.
Beyond the loss of value caused by the hack, I am quite disappointed with the crisis management. Information has been very scarce, and some of the measures taken are questionable.
I can only hope for a swift resolution, but please, at the very least, allow WETH users to protect their positions.
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To be clear I’m not saying Umbrella should be exempt from slashing, that is literally what it’s there for and I knew that going in. I’d accept a partial slash.
But the reality of the yield needs to be part of this conversation. Umbrella has been live for a couple of months. A full liquidation of the vault means losing everything for a yield we never collected, because of a protocol we never chose to interact with. I’m not trying to dodge accountability but that is not a proportional outcome.
What I’m pushing back on is wiping the vault entirely when the actual loss may end up being much smaller. Aave’s mainnet rsETH collateral is about 53K ETH against Kelp’s 630K reserves. If Aave Labs negotiates a direct redemption with Kelp that alone could close most of the gap. If Kelp socialises across all rsETH holders the residual bad debt drops further. There is a path here where Umbrella takes a hit but isn’t destroyed.
I also want to be clear I’m not trying to throw rsETH holders under the bus and I’m sorry if it came across that way. But there is a difference in how we got here. rsETH holders chose Kelp as a counterparty. Umbrella stakers backstopped Aave’s WETH market. Both groups are hurting but the loss should reflect the risk each group actually signed up for. The few times I used a bridge or deposited things in EigenLayer I was uneasy but never with Aave because they have been the rock solid standard for years and this hurts.
We want the same thing. Kelp held accountable and Aave coming out of this in one piece.
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New to the thread. I’m writing this as a WETH supplier on Arbitrum — a user with a rather conservative profile, who came to Aave specifically for its reputation as the safest and most trusted lending protocol in DeFi.
WETH suppliers on Arbitrum like me, are passive participants — they deposited liquidity into the protocol in good faith, with no governance rights and no vote on risk parameters.
It was the stkAAVE holders who voted in Proposal 434 to accept rsETH as collateral at a 93% LTV. That governance decision is the direct root cause of the current bad debt exposure.
If that’s the case, why should passive WETH lenders absorb a big haircut for a risk they never approved ?! The slashing mechanism exists precisely for this scenario — to align the cost of governance decisions with those who made them.
Socializing losses onto depositors who had no say in the matter would set a deeply troubling precedent for the entire DeFi lending space, and frankly, for Aave’s reputation as the safest lending protocol in the ecosystem.
The distribution of losses must reflect who took the governance risk !
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To put the risk into perspective: on-chain data shows the attacker deposited ~$293 million in fake rsETH and borrowed $196 million in WETH. This means their current Loan-to-Value (LTV) is only 66.8%. Because Aave’s E-Mode allows an LTV of up to 93%, the attacker’s account is technically considered ‘healthy’ by the smart contracts. If the protocol gates were simply unpaused today without intervention, the attacker would still have enough borrowing power to drain an additional ~$75 million in WETH.
However, there is a massive silver lining here. Because the attacker’s position is so heavily overcollateralized, Aave has a unique opportunity. If governance steps in to explicitly block and confiscate the attacker’s smart contract addresses, the protocol doesn’t just stop the bleeding—it seizes a position with a net positive value of nearly $100 million. This surplus collateral can then be liquidated and used to cover other bad debt across the protocol, effectively turning the attacker’s own unused buffer into a financial shield for Aave.
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As I understand if releted only to WETH?
Bad debt event affects only the WETH pool, as the entire bad debt (~$177–236M) was created in the WETH reserve on Ethereum mainnet.Umbrella is designed with strict asset-specific isolation. Each Umbrella vault protects only its corresponding asset:
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The WETH Umbrella vault can be automatically slashed to cover bad debt in the WETH pool.
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The USDT Umbrella vault (and USDC, GHO, etc.) is not affected and will not be slashed for this incident, because there is no bad debt in the USDT pool.
I got a limit order set on arbitrum at 2% discount to market value. So I’ll wait and see if it fills. However, even direct swaps are getting better. Currently about 11 -12% discount which is better than 60% discount. But I’ll wait and let it run. Thanks again. It’s a big relief.
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I am seeing lots of discussion around whether Kelp should socialize or make L1 holders whole at the expense of L2 holders. The argument is that L2 holders accepted bridge risk in exchange for the convenience of lower gas fees, etc.
This discussion is mute because the Kelp, the issuer, AND LayerZero, the service provider, very clearly state that a few things:
- Omnichain Fungible tokens, which rsETH is, have a shared unified supply
- All rsETH holders have equal redemption rights (pari passu), as per the both the Issuer’s and the Service Provider’s documentation and statements prior to the incident.
Preferential treatment of L1 holders over L2 holders would violate these rights. Kelp, as the issuer, would be violation of their own terms and regulations (MiCA). They would be making a conscious action to seize value from a subset of equal class holders and allocate that value to a different subset of equal class holders. This is clearly untenable.
The discussion would be entirely different if rsETH was minted on mainnet and bridged using a regular bridging mechanism. That is not how Kelp structured rsETH. All documentation clearly enumerates that all of the OFT tokens issued by Kelp have equal and equivalent redemption rights to the shared unified assets supporting the OFT.
The idea that an asset issuer, such as Kelp, could unilaterally decide to violate their own terms based on the “vibes” is insane. I encourage people to focus on how to manage the fallout from the socialized losses scenario, in which all OFT rsETH is marked down ~18%.
Let me say it again for the folks in the back. L2 rsETH do not have a claim on bridge assets – they have equal claim to the shared, unified collateral as enumerated in the OFT specification.
Disclaimers: I am not a lawyer and this is not legal advice. I do not hold any rsETH on any network, but I am a user (might even say power user) of Aave across all chains.
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Yeah we want the same thing and Kelp should be liable for the loss, most of the people here would agree on this. But the issue is who would cover the hole if a resolution is not reached?
Umbrella fund (the staked WETH on Ethereum) should definitely cover the loss of bad WETH withdrawals from the exploiter, up to the point where the deposit can be fulfilled without friction. The umbrella fund takes the extra rate and bear more responsibilities. I don’t think the umbrella fund needs to be slashed to a point to fully cover everything, but at least, it should cover to a point that the people who deposit ETH on mainnet can be made whole (e.g. not necessarily the rsETH can be over collatorazed as required, but at least to the point that once redeemed, it’s not undercollatorized and thus can make the deposit out)
Not to say that the umbrella funds need to be slashed to eat the loss and then we’re done, it’s never done - the umbrella fund owners do have the claim from Kelp DAO and Kelp DAO should compensate them, but this process is a separate one that the umbrella funds and Kelp DAO to figure out (Kelp do have the underlying assets as we all know). You can’t push this responsibility back to the protocol just like car insurance companies can’t ask insurer to pursue damage from a non-insured owner who’s responsible for the accident and thus not paying out the claim to the insurer even though the insurance companies (in this case, the umbrella funds) are entitled to the damage from the non-insured (Kelp DAO, but in this case, this “non-insured” does have the asset to be seized).
Glad you managed to get out, that’s reassuring 
I’m still stuck on Arbitrum unfortunately ((( Trying to exit via CoW as well — current orders in the screenshot What network were you on btw? Mainnet or L2? And what price did you set for aWETH → WETH, plus how long did it take to fill? Arb liquidity feels thinner tbh, trying to gauge the right level. Thanks!
true i did in arb 4.5% an hour ago still silence