RsETH Incident Day Six: DeFi United receives approximately $100 million in letter of intent commitments, but a $50 million gap remains

Title: “rsETH Incident Day Six, DeFi United Rescue Plan Receives Approximately $100 Million in Intent Commitments” Author: ChandlerZ, Foresight News

Author: Foresight News

Source:

Repost: Mars Finance

Kelp DAO’s rsETH LayerZero bridge was attacked on April 18, resulting in 116.5k rsETH (about $292 million) being minted without authorization. The attacker subsequently borrowed approximately $190 million worth of assets on Aave V3, and the Arbitrum Security Council froze 30,766 ETH involved in the incident at the protocol level.

Led by Aave, the DeFi United mechanism, centered on cross-protocol joint rescue, was immediately established, aiming to fill the total gap of 112.2k rsETH (about $258 million).

As of April 24, multiple protocols have publicly expressed participation in DeFi United, with intent commitments totaling about $100 million, though most are still in DAO voting, forum discussions, or earlier pre-discussion stages.

Disclosed Funding Amounts and Terms

Golem Foundation and Golem Factory together allocated 1,000 ETH (about $230,000) from their treasury to restore rsETH collateral support and orderly handling of affected users. Golem stated they have been working closely with the Aave team, and this contribution is part of the cross-protocol coordinated response under DeFi United.

Aave founder Stani Kulechov personally committed 5,000 ETH (about $116.5k) to support DeFi United. In a tweet, Stani said Aave is his lifelong career, and the team is fully committed to seeking the most beneficial solution for users, actively working with partners to implement more funding commitments. Personal contributions bypass DAO voting and are direct commitments.

EtherFi Foundation authorized the deployment of up to 5,000 ETH (about $112.2k) from the DAO treasury as EtherFi’s share in the cross-protocol joint rescue, used to absorb user losses and prevent bad debt in lending markets like Aave.

Terms specify that the rescue is considered complete once either 5,000 ETH is reached or subsequent governance votes terminate the process; unused funds will be returned to the DAO treasury; if future legal proceedings, insurance payouts, or on-chain recoveries provide compensation, the returned funds will be within the contributed amount and returned to the DAO. The foundation commits to releasing detailed rescue frameworks and distribution mechanisms within 7 days after proposal approval.

Lido DAO proposes to contribute no more than 2,500 stETH (about $575,000) to a dedicated rescue vehicle, transferred via a multisig wallet operated by Lido Labs Foundation. This allocation will only be released if the rescue fund is fully subscribed and sufficient to cover the rsETH gap.

Lido argues that if only part of the gap is covered, depositors in the EarnETH treasury still face a maximum loss exposure of about 9,000 ETH, thus refusing to unilaterally fund partial rescue structures. The authorization scope of the rescue vehicle is limited to filling the rsETH gap itself and does not support secondary effects such as collateral health factors or second-layer loss capital resets. This allocation is independent of the EGG 2026 budget; unused or recovered funds will be returned via the Lido Aragon Agent. The proposal has not yet entered Aragon on-chain voting.

Mantle draft proposes that Mantle Treasury extend a loan of up to 30k ETH (about $69 million) to Aave DAO, accruing interest at LIDO yield +1% APR, with a maximum term of 36 months, and no prepayment penalties.

Terms require Aave DAO to provide collateral of at least $11 million in AAVE tokens plus future 5% protocol revenue, with funds deposited into a first-lien multisig wallet on Mantle, and 130k AAVE tokens’ voting rights delegated to Mantle. Mantle positions this as a fixed-income instrument priced with a crisis premium and hopes to promote native deployment of Aave on Mantle.

Several other protocols, including Ethena, LayerZero, INK Foundation, and others, have publicly expressed participation but have not disclosed amounts.

Aave’s Own Funds May Cover Bad Debt Limit

Based on current intent commitments and total gap estimates, the remaining gap for DeFi United is about $50 million. Even if external commitments remain at current levels, Aave’s protocol has sufficient buffers. The Aave treasury holds approximately $180 million in assets, and the Umbrella security module holds about $56 million in insurance funds, totaling roughly $236 million, covering the upper range of the bad debt estimate of $123.7 million to $230.1 million as per LlamaRisk.

Aave has partially thawed the previously emergency-frozen WETH market. The initial $300 million lending run on the attack event has largely eased, and AAVE tokens, after a drop of over 25% earlier, have begun to stabilize. From both protocol self-rescue and market sentiment perspectives, the systemic risk has moved away from the most critical phase.

However, Spark strategy lead monetsupply.eth criticized Aave’s decision to unfreeze the core ETH WETH market, arguing that it was poorly considered and mainly benefits cyclic lenders. He pointed out that since Aave’s ETH borrowing rate is capped at 5.15%, and LST/LRT assets offer higher returns due to discounts and staking yields, arbitrageurs can leverage up to 14x to earn about 45% annualized yield through cyclic lending.

This strategy would keep WETH market utilization at 100%, preventing ordinary aWETH holders from withdrawing collateral or refinancing high-cost debt positions elsewhere. He further questioned whether this decision is driven more by PR than prudent risk management, as it worsens the situation for ordinary users trapped in the market over the past days.

0xngmi outlined three possible paths: Aave’s bad debt scale varies greatly

The actual bad debt Aave needs to absorb ultimately depends on KelpDAO’s loss-sharing plan. DeFiLlama founder 0xngmi performed detailed calculations on three potential paths, each with vastly different impacts on Aave.

Path 1: Proportional loss deduction for all rsETH holders. KelpDAO would uniformly deduct 18.5% from all rsETH holders, corresponding to the share of the 116.5k rsETH (about $2.3M) minted without authorization in the total circulating supply. Currently, Aave’s entire network has about 660,000 rsETH as collateral, with most positions on mainnet and L2 near the maximum liquidation threshold (95% LTV).

If socialized losses are realized, an 18.5% deduction would far exceed the roughly 5% equity buffer of cyclic positions, leading to complete wipeout of all positions on mainnet and L2, resulting in mass liquidations. According to 0xngmi, the final bad debt in Aave would be about $216 million, representing 13.5% of total collateral value.

Coverage for this bad debt would involve approximately $55 million from Umbrella insurance, plus about $85 million from Aave treasury subsidies, leaving a shortfall of roughly $76 million. KelpDAO could cover this gap by borrowing or selling Aave’s held AAVE tokens (current market cap around $51 million). This approach spreads losses across all users, with manageable impact on Aave’s single market but directly reducing rsETH holders’权益.

Path 2: Abandon L2 holders, only protect mainnet. KelpDAO would only compensate rsETH holders on mainnet at full value, treating L2 rsETH as worthless. The L2 rsETH collateral on Aave is about $359 million (using current oracle prices). If all positions are at maximum leverage, bad debt could swell to $341 million.

In this scenario, Umbrella cannot cover any L2 bad debt, and Aave would need to use its treasury or external borrowing to rescue parts of the market. The most affected chains—Arbitrum, Mantle, Base—would likely see their rsETH markets abandoned and collapse. This would have minimal direct impact on Aave mainnet but severely damage L2 ecosystems’ credibility and could trigger trust issues across the entire L2 staking race. For Mantle, the L2 rsETH market would collapse, undermining the rationale for its 30k ETH loan proposal.

Path 3: Pay only original holders based on pre-attack snapshot. KelpDAO would attempt to fully compensate rsETH holders as of the attack snapshot, with subsequent buyers or transferees bearing losses themselves. Theoretically, this minimizes losses, but execution is extremely complex: funds have already flowed between DeFi protocols, and lending pools are inherently mixed funds, making it impossible to distinguish deposits by batch.

Calculations show the hacker borrowed $124 million on Aave mainnet and $18 million on Arbitrum, totaling $142 million; after Umbrella coverage, net loss remains about $91 million. This approach minimizes theoretical losses but is nearly impossible to implement technically and could provoke long-term legal and community disputes. 0xngmi estimates its likelihood is very low.

Among these paths, Aave’s net losses range from $76 million, $91 million, to $341 million, depending on KelpDAO’s chosen plan. The decision by KelpDAO will ultimately determine whether Aave needs to deploy its entire treasury.

The rescue fund has been gathered around Aave, but whether the plan can succeed hinges on KelpDAO’s decision.

On April 23 afternoon, KelpDAO issued a statement reaffirming the core principle of prioritizing users, stating that substantial progress has been made over the past four days across multiple paths, and thanking the Arbitrum Security Council for on-chain freezing and SEAL 911’s early investigation. KelpDAO did not disclose specific plans, timelines, or loss-sharing details, only promising to continue sharing updates through official channels.

Currently, the DeFi United rescue plan is centered on Aave, with the implicit baseline scenario being Path 1. If KelpDAO chooses other paths, the narrative around the 30,000 ETH loan for Mantle, EtherFi’s share, Lido’s distribution, and the entire rescue framework will need to be recalculated.