Lido Leads Major $6M Push to Shore Up KelpDAO's rsETH After $290M Exploit
The decentralized finance (DeFi) ecosystem is currently rallying around KelpDAO's liquid restaking token, rsETH, following a significant LayerZero bridge exploit estimated at $290 million. In a crucial step towards recovery, Lido Finance has put forth a proposal to Aave, offering a substantial $6 million (2,500 stETH) to help cover the resulting rsETH shortfall and stabilize affected lending markets.
Coordinated Recovery Efforts
The recent incident, which left rsETH tokens underbacked, prompted Aave to swiftly launch a "DeFi United" initiative aimed at making impacted users whole. Lido Finance's proposal was submitted to Aave's Research Forum shortly after the exploit details began to emerge. Aave quickly announced that several strong commitments were lining up, with Lido being the first public participant, signaling a collaborative approach to addressing the crisis.
Conditions for Lido's Contribution
Lido's proposed contribution is contingent on several strict conditions to ensure maximum impact and responsible use of funds. The 2,500 stETH — valued at approximately $6 million — will only be deployed if the collective relief effort is sufficient to fully cover the entire rsETH deficit, which is reported to exceed 100,000 ETH. This ensures that the contribution is part of a comprehensive solution, not just a partial patch. Furthermore, any unused funds would be returned to Lido's treasury, and the allocated capital is strictly designated for rectifying the rsETH shortfall.
Market Fallout and Risk Mitigation
Lido's proactive involvement stems from its direct exposure to rsETH through its EarnETH vault, where users could face losses of up to 9,000 ETH without a coordinated recovery. Beyond this immediate response, Aave has also implemented measures to prevent further damage. It announced the pausing of rsETH reserves across various Ethereum and rollup environments, including Ethereum Core, Arbitrum, Base, Mantle, and Linea, to mitigate ongoing risks. The broader DeFi market has reacted sharply to the exploit, experiencing significant outflows. Aave alone reportedly saw around $9 billion in net outflows and a decline in its Total Value Locked (TVL) by over a third, dropping to approximately $14.3 billion. Across all decentralized lending protocols, DefiLlama data indicates a collective TVL reduction of roughly $13 billion within 48 hours of the exploit, underscoring the systemic impact of such security breaches.
