Aave has introduced a structured recovery strategy after an April 18 exploit disrupted its liquidity pools and collateral positions across multiple blockchain networks.
The proposal outlines how DeFi United, a coalition of industry participants, aims to rebuild the backing of rsETH and return impacted markets to stability.
Recovery Process
The incident began when a vulnerability in rsETH’s bridge from Unchain to Ethereum was exploited, allowing a fraudulent transaction to be processed. This resulted in the release of 116,500 sETH to several addresses, some of which were later used as collateral on Aave V3, while others were transferred to Arbitrum.
As part of the initial response, Arbitrum’s security council froze 30,766 ETH tied to the exploit. However, a significant portion remained in circulation, heavily affecting the market. Currently, around 107,000 sETH is still locked in active positions on Aave and Compound.
To address this, Aave coordinated a broader industry response through DeFi United and released a step by step plan to restore rsETH’s backing to its intended value of 1.017 ETH. The strategy involves gradually converting ETH into rsETH and depositing it into the bridge lockbox, enabling the system to resume normal operations safely.
Meanwhile, LayerZero Labs and KelpDAO have implemented additional safeguards to reduce the likelihood of similar vulnerabilities in the future.
Aave also confirmed it will resolve affected positions through governance proposals on Ethereum and Arbitrum, including temporary adjustments to rsETH pricing to facilitate smoother liquidations.
Recovered tokens will be transferred to a multisignature wallet controlled by DeFi United, then redeemed for ETH via KelpDAO’s standard mechanism and used to offset losses across impacted markets.
Recovery Outlook and Risks
The protocol estimates it can recover approximately 13,000 ETH within Aave, while Compound is expected to regain about 16,776 ETH. During this process, all WETH and rsETH reserves across Ethereum Core, Arbitrum, Base, Mantle, and Linea will remain frozen.
Aave emphasized that while the plan is designed to restore rsETH without passing losses on to users, there are still execution risks. These include the need for governance approval, the possibility of interference from the attacker, and the effectiveness of newly implemented security measures.
The team concluded that if all steps are carried out successfully, rsETH backing will be fully restored and affected markets will return to stability.#crypto#cryptonews https://coinsignals.net https://t.me/coinsignalpublic
