Key Highlights

  • LayerZero split its commitment across two pools: 5,000 ETH contributed to the DeFi United fund, and 5,000 ETH deposited directly into Aave to strengthen its liquidity position.
  • The $292 million Kelp DAO exploit involved an attacker forging a cross-chain message via LayerZero's DVN, releasing unbacked rsETH that was used as collateral on Aave lending pools.
  • DeFi United has now raised over $300 million in ETH and stablecoins across the broader DeFi ecosystem, with Aave coordinating the technical recovery plan.

LayerZero has committed 10,000 ETH, approximately $23 million at current prices, to the DeFi United recovery effort, making it one of the largest single contributors to the industry-wide response following the Kelp DAO exploit. The commitment is split between a direct contribution to the DeFi United fund and a deposit into Aave's liquidity pools to help restore depth to the affected market.

The exploit that triggered this response targeted a configuration weakness in Kelp DAO's cross-chain bridge. An attacker forged a message via LayerZero's DVN, taking advantage of a 1-of-1 DVN setup in which LayerZero Labs was the sole verifier. The forged message released unbacked rsETH on Ethereum, which then entered Aave's lending pools as collateral, creating $292 million in bad debt across the protocol.

A responsibility dispute sits at the center of the situation. LayerZero argues it recommended multi-DVN redundancy to all bridge operators as a standard security practice. Kelp DAO says it used the default DVN configuration provided by LayerZero and places blame upstream. The public disagreement adds complexity to the recovery process, though both parties appear committed to resolving the bad debt regardless of how liability is ultimately assigned.

The broader DeFi United initiative has now raised over $300 million in ETH and stablecoins from across the ecosystem. Notable commitments include 30,000 ETH from Consensys and Joseph Lubin, matched by a low-interest loan from Mantle, and a pending Arbitrum DAO vote to release 30,765 ETH. Aave founder Stani Kulechov has personally committed 5,000 ETH, with a separate Aave DAO vote pending on a 25,000 ETH contribution.

Aave is coordinating the technical recovery plan and has published a detailed account of how the bad debt will be addressed. A full timeline for restoring rsETH backing to its pre-exploit ratio has not yet been released.