Aave releases rsETH repair roadmap

Source: Aave; Translation: Golden Finance Claw

DeFi United (an alliance composed of ecosystem participants) has released a technical implementation plan aimed at restoring the reserve backing of KelpDAO rsETH after the April 18 incident. The plan covers the full process to restore rsETH to full collateralization and resume normal market operations.

Background of the Incident

On April 18, 2026, rsETH was attacked on the cross-chain bridge path from Unichain to Ethereum. A forged inbound data packet was validated on the Ethereum side, while the Unichain side did not perform the corresponding burn, resulting in the illegal release of 116,500 rsETH from the Ethereum adapter.

The 116,500 rsETH that were released were subsequently distributed across multiple addresses. Some were deposited as collateral into Aave V3 on Ethereum, while others were bridged to Arbitrum and used to open positions on Aave Arbitrum. The remaining portions were transferred through different platforms.

Currently, seven addresses associated with the attacker hold active rsETH collateral positions on Aave and Compound, involving approximately 107,000 of the original stolen 116,500 rsETH. The focus of the recovery work is twofold: (1) restore rsETH’s full reserve backing; (2) clear affected positions in liquidity markets to recover about 107,000 rsETH worth of surplus collateral, and address the resulting market impairment.

1. Restoring rsETH Reserve Support

To restore rsETH’s reserve, it must reflect its nominal exchange rate with Kelp rsETH (currently 1.07 ETH). This is being achieved through the DeFi United initiative, which has secured committed ETH funds necessary for restoring the affected system’s full operation. Final implementation depends on the completion of governance approvals, execution timetable, and formal protocol signing.

If the plan is successfully executed, rsETH’s reserve will be fully restored by depositing ETH into the cross-chain bridge’s lock contract (RSETH_OFTAdapter 0x85d456b2…98ef3). The restoration process involves converting the committed ETH into rsETH in batches and transferring it into the affected lock contract, enabling the cross-chain bridge to safely resume full operation. LayerZero and Kelp have implemented additional measures to ensure the security of cross-chain operations after recovery.

2. Clearing Affected Positions and Reclaiming Collateral

Alongside restoring rsETH’s reserve support, the plan also includes clearing eight affected positions on the Ethereum core market and Arbitrum market. Clearing these positions is a necessary step to recover approximately 13,000 ETH worth of funds on Aave and to address market impairments.

This process requires governance proposals specific to Ethereum and Arbitrum to be executed. The technical execution involves controlled liquidation sequences: the rsETH oracle price will be temporarily adjusted to facilitate efficient liquidation of positions, which will generate a temporary bad debt that will be addressed in the next step. The recovered rsETH collateral will be transferred to a designated multisig wallet managed by DeFi United.

These configuration adjustments are temporary and limited to the scope of recovery. After liquidation, all such adjustments will be fully reverted, and it is expected that the Aave protocol will not undergo any permanent configuration changes due to this governance proposal.

Once collateral is safely recovered, the rsETH price oracle will be restored. Subsequently, the recovered rsETH will be exchanged for ETH via Kelp’s standard redemption process. The obtained ETH will be used to cover bad debts in Aave’s Ethereum and Arbitrum markets.

Compound will similarly clear attacker positions, with liquidity provided by DeFi United. This team-led initiative is expected to recover approximately 16,776 ETH in funds upon completion. During this period, WETH and rsETH reserves on Ethereum core, Arbitrum, Base, Mantle, and Linea will remain frozen.

3. Restoring Normal Market Operations

Restoring rsETH reserve support and clearing affected positions can be performed in parallel. The final phase of the recovery process involves unpausing and unfreezing all affected instances of rsETH and ETH, and restoring ETH and any assets temporarily adjusted in configuration to their loan-to-value ratios (LTV).

Precautions

Although the plan aims to restore rsETH reserves without socializing losses, its execution still carries risks:

• Fund Deployment: DeFi United has secured sufficient ETH commitments, but deployment depends on final protocol approval and governance.

• Governance and Liquidation Execution: Closing affected positions requires governance proposals on Ethereum and Arbitrum to be approved and properly executed. Malicious interference by attackers could lead to incomplete bad debt accumulation, necessitating additional liquidation steps.

• Cross-Chain Bridge Security: Despite additional security measures implemented by LayerZero and Kelp before resuming operations, residual risks remain until production environment verification is complete. To manage risks, ETH to rsETH conversions and lock deposits will be conducted in multiple batches.

Coordinated execution of these steps as planned will ensure rsETH’s reserve support is fully restored and all affected markets stabilize. Relevant information will be publicly disclosed as recovery progresses.