DefiLlama Founder Analyzes Three Possible Resolution Paths for the Kelp DAO Incident and Corresponding Potential Bad Debt Sizes
According to a post by 0xngmi, founder of DefiLlama, following the hack of KelpDAO, Aave is facing severe pressure in handling bad debt. Currently, there are three potential solutions:
First, socializing the loss across all users—this would result in an 18.5% impairment for users, generating approximately $216 million in bad debt. Aave’s Umbrella Insurance could cover $55 million, and the treasury could contribute an additional $85 million, leaving a shortfall of roughly $76 million.
Second, executing a “rug pull” on rsETH holders on L2 chains—this would generate approximately $341 million in bad debt, with Arbitrum, Mantle, and Base markets suffering the heaviest losses.
Third, returning assets to holders based on a pre-attack snapshot—but this approach is extremely operationally challenging, and even after Umbrella Insurance coverage, an estimated $91 million in losses would remain.
Additionally, some suggest confiscating the hacker’s collateral to offset part of the bad debt. Meanwhile, Aave’s OG Security Module still holds approximately $300 million worth of AAVE tokens; applying a 20% reduction would provide an additional ~$60 million in loss coverage.
