LayerZero Commits 10,000 ETH to DeFi United After Kelp DAO Exploit
LayerZero has pledged 10,000 ETH to the DeFi United initiative, formed in the wake of Kelp DAO's $292 million exploit, according to CoinDesk. The crypto infrastructure provider said in a Tuesday announcement it will donate 5,000 ETH directly to DeFi United and deploy another 5,000 ETH on Aave to bolster liquidity.
As part of the arrangement, further steps are also set to support liquidity for GHO, Aave's native stablecoin. At roughly $2,300 per ETH at the time of writing, LayerZero's commitment is worth about $23 million, based on The Block's price data.
The pledge follows LayerZero's statement five days earlier that it would support an "industrywide recovery plan", later branded DeFi United, aimed at restoring backing for rsETH after the attack.
On April 18, an attacker used a sophisticated RPC poisoning technique targeting LayerZero Labs' decentralized validator network to forge a cross-chain message. That enabled the release of unbacked rsETH via Kelp's LayerZero-enabled Ethereum bridge adapter. About 107,000 rsETH flowed into Aave lending positions, creating material bad debt that a coordinated group has been working to unwind.
DeFi United has now raised more than $300 million in ETH and stablecoins from dozens of protocols and individuals. Aave, which is coordinating the effort, recently published a technical recovery plan to re-establish rsETH support.
Some market participants have attributed a meaningful share of responsibility to LayerZero, noting KelpDAO used a 1-to-1 DVN setup with LayerZero Labs as the sole verifier. LayerZero says it recommended multi-DVN redundancy, while Kelp has said it relied on the default configuration.
LayerZero's contribution places it among the largest backers of the initiative. The Arbitrum DAO is voting on releasing 30,765 ETH. Consensys and Joseph Lubin jointly donated 30,000 ETH, which was matched via a low-interest loan from Mantle. The Aave DAO is also voting on a 25,000 ETH donation, in addition to a 5,000 ETH contribution from Aave founder Stani Kulechov. Kelp donated 2,000 ETH. Circle is supporting the effort by purchasing AAVE tokens.
The exploit has also weighed on the broader DeFi market. The Block data shows industry TVL fell to about $80 billion from roughly $95 billion before the hack. Aave's Ethereum mainnet TVL dropped from more than $32 billion to $20.3 billion.
