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Project Overview
Aave is a decentralized finance protocol for borrowing and lending, where users can participate as depositors or borrowers. Depositors provide liquidity to the market to earn a passive income, while borrowers are able to borrow in an overcollateralized (perpetually) or undercollateralized (one-block liquidity) fashion. AAVE is used as the center of gravity of Aave Protocol governance, allowing users to vote and decide on the outcome of Aave Improvement Proposals (AIPs). Additionally, AAVE can be staked within the protocol's Safety Module to provide security/insurance to the protocol and depositors. Stakers earn staking rewards and fees from the protocol.
Andre Cronje: Aave Has No Mechanism to Subsidize User Losses, ETH Withdrawn to Fund Management Wrapper Contract
Odaily News: Sonic Labs co-founder and Flying Tulip founder Andre Cronje posted on platform X, stating that his team is continuing to investigate the L0/rsETH incident. Preliminary reports indicate that approximately $200 million worth of rsETH was stolen, possibly due to a private key leak or configuration error. The related assets were subsequently deposited into Aave as collateral to borrow ETH (due to insufficient rsETH liquidity).Andre Cronje pointed out that the affected positions are technically still overcollateralized. However, if bad debt occurs, Aave's token mechanism and Safety Module will serve as the first line of defense to absorb the risk. Nevertheless, Aave has no mechanism to subsidize user losses, as doing so could trigger a bank run. Currently, Aave holds approximately $7 billion in ETH with an outstanding borrowing amount of around $100 million, so the overall impact of this incident is limited. Furthermore, prioritizing user liquidity, Flying Tulip has withdrawn all its ETH from Aave to its fund management wrapper contract. This action was taken because Aave's available liquidity had fallen below its set minimum threshold.
Aave has frozen the rsETH markets on Aave V3 and Aave V4.
Regarding the KelpDAO hack, Aave tweeted that the rsETH markets on Aave V3 and Aave V4 have been frozen. Aave stated that its contracts were not exploited and that this incident is related to the exploit of Kelp DAO’s rsETH cross-chain bridge. The freeze will prevent new rsETH deposits and rsETH-backed lending. Aave is currently reviewing lending activity involving rsETH on the platform following the exploit and has indicated that, should the protocol accumulate bad debt as a result, it will explore options to cover the deficit. Earlier reports indicated that Kelp DAO’s cross-chain bridge was hacked, resulting in the theft of approximately $292 million worth of rsETH, exposing Aave V3 to bad debt risk.
Kelp DAO Cross-Chain Bridge Attacked, ~$292M rsETH Stolen
According to CoinDesk, Kelp DAO’s LayerZero-based cross-chain bridge was attacked, with the attacker withdrawing 116,500 rsETH—worth approximately $292 million at current prices, or roughly 18% of its circulating supply. This incident has become the largest DeFi attack of 2026 to date. In response, Aave, SparkLend, and Fluid have frozen rsETH-related markets, and Lido Finance has suspended new deposits into its earnETH product. Kelp DAO stated it is jointly investigating the incident with LayerZero, auditing firms, and external security experts.
Aave Labs Launches AI Governance Security System Aave Checkpoint
According to an official announcement, Aave Labs has launched Aave Checkpoint—a governance security system powered by AI—to conduct structured, multi-layered reviews of governance proposals and payloads before they are executed on-chain. The system has been operational since March 2026 and has covered all governance proposals during that period. Aave Checkpoint combines automated analysis with mandatory manual review: it fetches on-chain payload data, proposal source code, and IPFS-hosted text, then cross-references Seatbelt simulation results to examine execution paths, state changes, and potential risks—generating audit reports accordingly. Each AI-generated report must be signed off by at least two independent reviewers before the review is finalized. Currently, the system supports Aave V3, V4, GHO, and Aptos-v3.
A wallet associated with Fenbushi Capital withdrew 3,063 ETH from Aave and deposited it into Binance, generating an unrealized profit of approximately $969,000.
According to on-chain analytics platform Lookonchain (@lookonchain), the wallet address 0x859D—associated with Fenbushi Capital—withdrawed 3,063 ETH (approximately $7.13 million) from Aave and immediately deposited them into Binance. These ETH were withdrawn from Binance one month ago at an average price of $2,017; the current unrealized profit is approximately $969,000.
Galaxy Digital OTC-linked address deposits 15,000 ETH to exchange, valued at $34.74 million
Odaily报道 According to Ai Yi monitoring, a Galaxy Digital OTC-related address (0x16F...1Fde) has deposited 15,000 ETH, worth $34.74 million, to an exchange. These funds originated from 38,000 ETH withdrawn from Aave a week ago, which was the day when Kelp DAO was attacked, causing Aave to potentially face bad debt.
Balancer attacker-linked address transferred 5,609 ETH worth $13 million to THORChain over the past 9 hours
according to on-chain analyst Ai Yi's monitoring, an address linked to the Balancer attacker has transferred 5,609 ETH, worth $13 million, to THORChain over the past 9 hours. In November 2025, Balancer was hacked for over $116 million, a incident with the same suspected culprit as the Aave attack, both pointing to the North Korean hacker group Lazarus Group. Both entities have recently been frequently using Tornado Cash for money laundering.
Aave’s “DeFi United” Relief Program has currently received commitments for loans and donations totaling 69,576 ETH.
According to on-chain analyst Yujin (@EmberCN), Aave covered $25,000 ETH (approximately $57.75 million) out of its own funds to address bad debt arising from the rsETH incident and spearheaded the “DeFi United” relief initiative. The total bad debt shortfall stands at 75,081 ETH; commitments for loans and donations totaling 69,576 ETH have already been secured, leaving a remaining gap of only 5,505 ETH. Multiple institutions—including LayerZero—have confirmed participation in the relief effort, though specific contribution amounts have not yet been disclosed. The shortfall is expected to be fully covered.
rsETH Incident Leads to ~37% Drop in Aave Deposit Scale; Capital Outflows Now Slowing
According to monitoring by crypto analyst @EmberCN, after Aave coordinated the establishment of "DeFi United" and received approximately 30,000 ETH in loans and 13,500 ETH in donations, the platform's capital outflows have shown signs of slowing.Data indicates that Aave's current total deposit scale stands at approximately $28.6 billion, a decrease of about $17.2 billion, or roughly 37%, compared to before the rsETH incident.
An address deposited 1.397 million UNI tokens—worth approximately $4.6 million—to three exchanges two hours ago.
According to on-chain analyst Ai Aunt (@ai_9684xtpa), the address 0xb5E…Fc24e deposited a total of 1.397 million UNI tokens—worth approximately $4.6 million—into three exchanges two hours ago. Notably, the Bybit deposit address has had multiple interactions with the DeFi crypto fund DeFiance Capital, which is an investor in both Aave and LayerZero—two entities closely linked to the recent Kelp DAO hack incident.
ether.fi responds to supporting Kelp compensation fund with 5,000 ETH: Citing concerns that a hack could trigger a systemic DeFi collapse
Odaily News ether.fi CEO Mike Silagadze posted on X platform to explain the reason behind the company's commitment of 5,000 ETH to the Kelp hack recovery fund. He stated that the team believes this incident posed a real risk of "destroying the entire DeFi ecosystem." If Kelp were to go bankrupt, $1.5 billion worth of rsETH could be frozen long-term, potentially bringing the $30 billion Aave lending market to a standstill and triggering a cascading collapse across both DeFi and CeFi, which he described as making "FTX look insignificant by comparison." Mike Silagadze added that while most institutions chose to step back and defer to legal counsel, proactively taking responsibility and quickly raising funds to plug the gap was the right choice to help avert the worst-case scenario.
DeFi United Raises Over $300 Million in Funding
Circle Ventures, Consensys, and Joseph Lubin have announced their support for the DeFi United initiative, aimed at mitigating losses caused by the Kelp DAO vulnerability. Circle Ventures is supporting the ecosystem by purchasing AAVE tokens. Consensys and Ethereum co-founder Joseph Lubin have confirmed the provision of 30,000 ETH to DeFi United. To date, DeFi United has raised over 132,000 ETH, with a total value exceeding $300 million. These funds will be used to cover bad debts resulting from an attacker minting unbacked rsETH via the LayerZero bridge and borrowing assets on Aave. Previously, Aave proposed a donation of 25,000 ETH, while Lido DAO, Ether.fi, and Kelp have respectively proposed or pledged donations of 2,500 ETH, 5,000 ETH, and 2,000 ETH.
Galaxy Digital OTC-linked address deposits 15,000 ETH to exchange, valued at $34.74 million
Odaily报道 According to Ai Yi monitoring, a Galaxy Digital OTC-related address (0x16F...1Fde) has deposited 15,000 ETH, worth $34.74 million, to an exchange. These funds originated from 38,000 ETH withdrawn from Aave a week ago, which was the day when Kelp DAO was attacked, causing Aave to potentially face bad debt.
Balancer attacker-linked address transferred 5,609 ETH worth $13 million to THORChain over the past 9 hours
according to on-chain analyst Ai Yi's monitoring, an address linked to the Balancer attacker has transferred 5,609 ETH, worth $13 million, to THORChain over the past 9 hours. In November 2025, Balancer was hacked for over $116 million, a incident with the same suspected culprit as the Aave attack, both pointing to the North Korean hacker group Lazarus Group. Both entities have recently been frequently using Tornado Cash for money laundering.
An address deposited 1.397 million UNI tokens—worth approximately $4.6 million—to three exchanges two hours ago.
According to on-chain analyst Ai Aunt (@ai_9684xtpa), the address 0xb5E…Fc24e deposited a total of 1.397 million UNI tokens—worth approximately $4.6 million—into three exchanges two hours ago. Notably, the Bybit deposit address has had multiple interactions with the DeFi crypto fund DeFiance Capital, which is an investor in both Aave and LayerZero—two entities closely linked to the recent Kelp DAO hack incident.
Mantle plans to provide Aave with a 30,000 ETH loan to help mitigate its bad debt risk.
According to information on the governance forum page, Mantle plans to provide Aave with a loan of 30,000 ETH to help it address the non-performing loan risk triggered by the recent attack. According to analyst Yujin’s statistics, confirmed rescue funds now cover a shortfall of approximately 43,500 ETH.
ether.fi responds to supporting Kelp compensation fund with 5,000 ETH: Citing concerns that a hack could trigger a systemic DeFi collapse
Odaily News ether.fi CEO Mike Silagadze posted on X platform to explain the reason behind the company's commitment of 5,000 ETH to the Kelp hack recovery fund. He stated that the team believes this incident posed a real risk of "destroying the entire DeFi ecosystem." If Kelp were to go bankrupt, $1.5 billion worth of rsETH could be frozen long-term, potentially bringing the $30 billion Aave lending market to a standstill and triggering a cascading collapse across both DeFi and CeFi, which he described as making "FTX look insignificant by comparison." Mike Silagadze added that while most institutions chose to step back and defer to legal counsel, proactively taking responsibility and quickly raising funds to plug the gap was the right choice to help avert the worst-case scenario.
Puffer Finance Deploys Treasury Funds to Support the Aave DeFi United Initiative
According to an official announcement by Puffer Finance, the liquid staking protocol Puffer Finance has allocated treasury funds to Aave’s DeFi United program to demonstrate its support for infrastructure development. Puffer Finance stated that, as a liquid staking protocol centered on security, it believes robust infrastructure and consistent incentive mechanisms are fundamental to ensuring DeFi’s resilience during critical moments. The protocol also emphasized that DeFi is a vital component of the modern financial system, and industry participants should compete constructively, continuously build infrastructure, and maintain coordination during critical times.
LayerZero Labs Commits Over 10,000 ETH to DeFi United
LayerZero Labs announced on platform X that it has committed over 10,000 ETH in support to DeFi United, led by Aave. Specific actions include donating 5,000 ETH to DeFi United, depositing 5,000 ETH into the Aave market to enhance liquidity, and deepening GHO liquidity.
Bybit Alpha and Byreal Have Launched AAVE Trading
It is reported that Bybit Alpha and Byreal have now launched $AAVE trading, with the current price on the Solana blockchain at $97. AAVE has previously completed its cross-chain migration to the Solana mainnet.
AAVE Announces rsETH Recovery Technical Plan, Aims to Simultaneously Repair Collateral Support and Affected Positions
AAVE has announced the technical implementation plan for the rsETH recovery, proposing a three-phase repair process involving supplementing ETH collateral, cleaning up affected positions, and restoring market parameters, aiming to restore full collateral support for rsETH and resume normal market operations.The plan indicates that DeFi United has coordinated to secure the necessary ETH commitment for the recovery. It will restore rsETH support by batch-converting and injecting into the bridge lockup contract. Simultaneously, it proposes clearing affected positions on Aave and Compound through a governance proposal, recovering approximately 107,000 rsETH in related excess collateral, and gradually lifting the frozen status of the relevant assets.
DeFi United Raises Over $300 Million in Funding
Circle Ventures, Consensys, and Joseph Lubin have announced their support for the DeFi United initiative, aimed at mitigating losses caused by the Kelp DAO vulnerability. Circle Ventures is supporting the ecosystem by purchasing AAVE tokens. Consensys and Ethereum co-founder Joseph Lubin have confirmed the provision of 30,000 ETH to DeFi United. To date, DeFi United has raised over 132,000 ETH, with a total value exceeding $300 million. These funds will be used to cover bad debts resulting from an attacker minting unbacked rsETH via the LayerZero bridge and borrowing assets on Aave. Previously, Aave proposed a donation of 25,000 ETH, while Lido DAO, Ether.fi, and Kelp have respectively proposed or pledged donations of 2,500 ETH, 5,000 ETH, and 2,000 ETH.
Related news
ether.fi responds to supporting Kelp compensation fund with 5,000 ETH: Citing concerns that a hack could trigger a systemic DeFi collapse
Odaily News ether.fi CEO Mike Silagadze posted on X platform to explain the reason behind the company's commitment of 5,000 ETH to the Kelp hack recovery fund. He stated that the team believes this incident posed a real risk of "destroying the entire DeFi ecosystem." If Kelp were to go bankrupt, $1.5 billion worth of rsETH could be frozen long-term, potentially bringing the $30 billion Aave lending market to a standstill and triggering a cascading collapse across both DeFi and CeFi, which he described as making "FTX look insignificant by comparison." Mike Silagadze added that while most institutions chose to step back and defer to legal counsel, proactively taking responsibility and quickly raising funds to plug the gap was the right choice to help avert the worst-case scenario.
A wallet associated with Fenbushi Capital withdrew 3,063 ETH from Aave and deposited it into Binance, generating an unrealized profit of approximately $969,000.
According to on-chain analytics platform Lookonchain (@lookonchain), the wallet address 0x859D—associated with Fenbushi Capital—withdrawed 3,063 ETH (approximately $7.13 million) from Aave and immediately deposited them into Binance. These ETH were withdrawn from Binance one month ago at an average price of $2,017; the current unrealized profit is approximately $969,000.
Puffer Finance Deploys Treasury Funds to Support the Aave DeFi United Initiative
According to an official announcement by Puffer Finance, the liquid staking protocol Puffer Finance has allocated treasury funds to Aave’s DeFi United program to demonstrate its support for infrastructure development. Puffer Finance stated that, as a liquid staking protocol centered on security, it believes robust infrastructure and consistent incentive mechanisms are fundamental to ensuring DeFi’s resilience during critical moments. The protocol also emphasized that DeFi is a vital component of the modern financial system, and industry participants should compete constructively, continuously build infrastructure, and maintain coordination during critical times.
RedStone Launches Settlement Layer to Address RWA Liquidity Gaps in DeFi Lending
According to Cointelegraph, decentralized oracle service provider RedStone has officially launched RedStone Settle, a settlement layer product designed for decentralized finance (DeFi), aiming to address structural barriers hindering tokenized real-world assets (RWAs) from being used as collateral in lending protocols. The product’s core mechanism is an on-chain auction: when a lending protocol triggers a liquidation event, liquidity providers can immediately step in to purchase the relevant positions, supplying instant liquidity to the protocol while independently bearing the risk of delayed redemption of the underlying assets. This aims to bridge the mismatch between the near-instant liquidations required by DeFi platforms (e.g., Aave) and the typical 60- to 180-day redemption periods associated with RWAs—including tokenized funds and bonds. RedStone states that this solution could unlock over $30 billion worth of tokenized RWAs currently idle in DeFi, enabling users to borrow more efficiently against interest-bearing positions. According to data from RWA.xyz, the current market size of tokenized RWAs—excluding stablecoins—exceeds $30 billion, primarily driven by U.S. Treasury exposure and private credit products.
LayerZero Labs Commits Over 10,000 ETH to DeFi United
LayerZero Labs announced on platform X that it has committed over 10,000 ETH in support to DeFi United, led by Aave. Specific actions include donating 5,000 ETH to DeFi United, depositing 5,000 ETH into the Aave market to enhance liquidity, and deepening GHO liquidity.
Bybit Alpha and Byreal Have Launched AAVE Trading
It is reported that Bybit Alpha and Byreal have now launched $AAVE trading, with the current price on the Solana blockchain at $97. AAVE has previously completed its cross-chain migration to the Solana mainnet.