DeFi Alliance Decision: 43,500 ETH Bailout Announced to Resolve Kelp DAO Hack

On Friday, April 24, 2026, the decentralized finance (DeFi) ecosystem demonstrated an unprecedented sense of solidarity. A coalition of major protocols led by Aave pledged a total of 43,500 ETH to the 'DeFi United' recovery fund. This decision is a measure to restore the collateral value of rsETH, which was compromised by the $292 million Kelp DAO exploit on April 18, 2026, and to promote stability in the liquid restaking market.

This bailout was organized to address the severe under-collateralization issue facing Kelp DAO's rsETH token. Aave took on the role of coordinator for this 'DeFi United' effort, drawing participation from across the ecosystem. The 43,500 ETH amount represents approximately 37% of the total loss of 116,500 ETH and is expected to serve as a decisive catalyst in calming market fears.

The rsETH incident is a very serious matter that struck at the core of our protocols. We must reflect on the lessons of the past and act together to overcome this crisis.

The incident originated from a technical vulnerability attack on Kelp DAO on April 18, 2026. The attacker successfully released 116,500 rsETH from the Ethereum side adapter using forged inbound packets without a burn procedure on the source chain. In the process, a vulnerable configuration of the LayerZero bridge was exploited, and massive funds were drained in just a few hours.

Market Contagion and the Devaluation of rsETH

Immediately after the hack, the price of rsETH plummeted to $0.71 against the dollar, showing a severe de-pegging phenomenon. This price crash transferred systemic risk to lending protocols like Aave and Compound, which had adopted rsETH as collateral. As collateral values fell, the risk of large-scale liquidations escalated, leading to a liquidity crunch across the entire DeFi market.

• Mantle: Pledged participation in the recovery fund and liquidity support
• EtherFi Foundation: Decided to donate ETH for ecosystem stability
• Lido DAO: Temporary suspension of earnETH deposits and cooperation in the recovery process
• Ethena: Temporary blocking of the LayerZero bridge and security enhancement measures
• LayerZero and Golem Foundation: Participating in solidarity through infrastructure and financial support

Security experts are pointing to LayerZero's '1-of-1' deployment configuration as the root cause of this incident. According to investigation results, approximately 47% of protocols using LayerZero are using similar high-risk settings. While LayerZero has recommended multi-validator configurations, it has become difficult for many projects to avoid criticism for prioritizing convenience over security.

The recovery plan announced on April 24, 2026, is acting as a positive signal for market participants. Although 43,500 ETH does not completely cover the total loss, the fact that major protocols voluntarily injected funds is greatly helping to restore user trust. This situation has left an important lesson that the Liquid Restaking Token (LRT) ecosystem must establish stronger cross-chain security standards in the future.