Aave publishes plan to plug $246m hole left by Kelp DAO attackers

Aave and Compound are moving closer to plugging the $246 million hole left by the Kelp DAO hack.

On Tuesday, DeFi United, a coalition of several protocols that includes the top decentralised finance lenders, published a technical implementation for restoring the backing for rsETH, the token stolen in the attack.

“DeFi United has secured sufficient ETH commitments to restore full backing,” Aave said in the outline, adding that the plan is to restore rsETH backing without socialising losses among the protocol’s users.

On April 18, North Korean hackers stole $293 million from Kelp DAO by tricking the protocol into releasing unbacked rsETH tokens.

The attackers deposited some of these tokens as collateral on Aave and Compound, then borrowed large amounts of Ether, leaving the pair with a combined $246 million in bad debt.

If DeFi United’s plan is successful, Aave and Compound users whose assets were withdrawn by the hackers using the dummy rsETH collateral will get them back in full.

The Kelp DAO hack is one of several major crypto thefts in recent months.

The spree has sparked a crisis of confidence within the DeFi community, with many industry insiders questioning if the trade-offs inherent in decentralised technology are worth the trouble.

Restoring the backing

DeFi United will start restoring rsETH’s backing by converting committed Ether into the asset in multiple tranches.

This will replenish rsETH’s backing so that every token in circulation will once again be…