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Aave Outlines Steps to Rebuild rsETH Collateral
TL;DR
Aave has announced a recovery plan to restore rsETH collateral following an exploit that released 116,500 rsETH. The DeFi United initiative aims to revive the token's backing and stabilize affected markets.
Key points
- Aave announced a recovery plan for rsETH collateral
- 116,500 rsETH was released due to an exploit
- DeFi United is coordinating the recovery efforts
- 107,000 rsETH remains locked in Aave and Compound
- Aave aims to restore rsETH's expected value of 1.017 ETH
Mentioned in this story
AaveDeFi United
rsETH
Aave has announced a recovery plan following an April 18 exploit that affected its liquidity markets and collateral positions on several chains.
The update explains how DeFi United, a group of ecosystem participants, intends to restore the backing of rsETH and bring affected markets back to normal.
Recovery Process
The issue started when an attacker exploited a vulnerability in rsETH’s bridge from Unichain to Ethereum, causing a fake transaction to be processed on Ethereum. Therefore, 116,500 rsETH was released to multiple addresses, some of which were used as collateral on Aave 3 and some bridged to Arbitrum. Early damage-control measures included the Arbitrum security council freezing 30,766 ETH linked to the exploit. However, this still left a huge balance and had a major impact on the markets.
At the moment, about 107,000 rsETH from the stolen amount remains locked in active positions on Aave and Compound. To fix this, the protocol organized a coordinated industry response under the DeFi United initiative, later sharing a detailed procedure on social media to revive the token’s backing so that it matches its expected value of 1.017 ETH.
Aave said that the plan is to convert that ETH into rsETH in stages and deposit it into the bridge lockbox, which will allow the system to safely resume normal operations. At the same time, LayerZero and KelpDAO have added extra security measures to reduce the risk of similar issues happening again.
According to an article it posted on X, Aave will work on clearing the affected positions through governance proposals on Ethereum and Arbitrum. The process will also temporarily adjust the price of rsETH to allow for easier liquidations.
The protocol will then send the recovered tokens to a multisig wallet held by DeFi United, which will be redeemed for ETH via Kelp’s standard process and used to cover the shortfall on the affected markets.
Aave Shares Recovery Projections
The firm estimates that these efforts will help it recover around 13,000 ETH on Aave, while Compound will regain approximately 16,776 ETH. It also clarified that all WETH and rsETH reserves on Ethereum Core, Arbitrum, Base, Mantle, and Linea will remain frozen throughout the period.
Q&A
What caused the exploit affecting rsETH collateral on Aave?
The exploit was caused by a vulnerability in rsETH’s bridge from Unichain to Ethereum, which allowed a fake transaction to be processed.
How much rsETH remains locked in positions on Aave and Compound after the exploit?
Approximately 107,000 rsETH from the stolen amount remains locked in active positions on Aave and Compound.
What steps is Aave taking to recover the value of rsETH?
Aave is coordinating a recovery plan through the DeFi United initiative to restore rsETH's backing and stabilize its expected value.
