Key Highlights
- Aave halts rsETH reserves over Ethereum Core, Arbitrum, Base, Mantle, and Linea.
- This is done in an attempt to aid fund recovery after the Kelp DAO bridge hack.
- Approximately 116,500 rsETH were generated from a spoofed message, while 89,000 rsETH were provided as collateral on Aave.
Aave has come up with an update about the issue related to rsETH where they mentioned that the reserves of rsETH have been frozen on multiple networks like Ethereum Core, Arbitrum, Base, Mantle, and Linea.
As per the official update shared via X today, this decision was made to assist in fund recovery. The protocol also mentioned that it will further keep the community informed about the further steps implemented.
The originating event
The event originated from a hack related to Kelp DAO’s rsETH bridge mechanism. In particular, the hacker exploited the weakness of a LayerZero V2 bridge between Unichain and Ethereum. The bridge was configured for 1-of-1 DVN; therefore, a fraudulent inbound message could be successfully verified without being confirmed by the originating network.
Consequently, about 116,500 rsETH tokens were unlocked through the Ethereum side of the bridge without triggering a burn event on the originating network. The hacker transferred the funds into various addresses and deposited more than 89,567 rsETH tokens into Aave to secure the funds as collateral.
The hacker then proceeded to open lending positions on various networks, such as Ethereum and Arbitrum. According to reports, at least seven accounts are still lending out their rsETH in positions near or below the liquidation level. This posed a danger to lending platforms, and as such, quick action was taken by the risk management team at Aave.
Set of precautionary measures
In turn, the Protocol Guardian and Risk Steward of Aave introduced a set of precautionary steps. The first involved the suspension of the reserves of rsETH and wrsETH tokens on all Aave V3 networks, the establishment of an LTV ratio of zero, and the prohibition of borrowing and supplying the problematic assets.
Meanwhile, the current positions will continue to be available for repayment and liquidation. To prevent a chain reaction from spreading further, changes were made to the interest rate models for WETH on multiple chains, whereas the reserves of WETH were frozen on selected markets.
Further updates anticipated
In addition, the token related to Kelp DAO, known as rsETH, follows the bridge design, which is based on a lock-and-mint system. The attack threw off balance the ratio of locked and circulating tokens because, at the moment, only the Ethereum mainnet rsETH tokens are backed by staking deposits. How losses will be distributed across the bridges remains unclear.
In response to this issue, the Aave protocol released an update. In particular, the protocol decided to suspend all reserve assets for the most prominent chains in order to minimize risks and continue recovery. Further updates are anticipated as investigation advances and stakeholders determine the upcoming course of action.
Also Read: Kelp DAO Bridge Drained for $292M in 2026’s Biggest DeFi Hack
