Aave just watched $6.6 billion walk out the door, and it’s not because anyone hacked Aave.
Total value of the protocol was lowered from $266 to $26 locked. U.S. 4 billion on April 18 to nearly $20 billion in U. s S DefiLlama Morning hours on Sunday, according to . The $AAVE coin sank 16% to $92, and daily fees spiked $1. During the weekend, 99 million as liquidations were spilled through the weekends to .
Aave has carries a hole it did not create that was carried by depositors because deposits are running because the hole is being held in its own place. They dumped the stolen tokens on Aave V3 as collateral when attackers drained from Kelp’s bridge on Saturday, and borrowed wrapped ether against them.
The Aave-specific borrow is rated at about $196 million by on-chain trackers, with total positions across Aarve, Compound and Euler around $236 million.
The biggest lending protocol in DeFi (Aave) is the use of users deposit crypto to earn yield and other users borrow against collateral. The protocol Kelp is a liquid restaking protocol, which involves the acquisition of ether that has already been staked on Ethereum and then sends it through specialized yield-generating system called EigenLayer, giving an exchange for rsETH (receiving receipt token) in exchange.
That rsETH is what users trade and, critically, what some users posted on Aave as collateral to borrow against.
A. cross-chain bridge, Kelp’s cross chain bridge was tricked by attackers on Saturday to release 116,500 rsETH (about $292 million worth) to an address they controlled under the attack of their mastermind “It is about two weeks after I have been in jail for this week and it has taken over.” They then deposited stolen rsETH onto Aave V3 as collateral and borrowed wrapped ether against it.
A bridge is a blockchain-based took that transfers tokens between different networks, where they may not be originally supported.
The Umbrella reserve would cover any deficit, Aave first said. But by Saturday afternoon, the language had cooled to “explore paths” in order to offset the deficit with speech. It knows how much it owes and has the money to pay it, so that’s not what a protocol talks when it knows its value and is entitled to “that” paraphrasingr.
It is the concentration that explains why the damage comes here, as it says. The loan book by Aave is a 22-chain chain of loans, but Ethereum alone holds $14. of the $17 – 24 billion, or 24billion) of that. Loans 82billion in outstanding borrowings for . The WETH is 39-years-old. It was the attack on the exact collateral-to–WETH pair that dominates Aave’s book, and is responsible for 49% of all loans on this protocol.
The exploit was external, and the protocol’s contracts were not hacked,” said Stani Kulechov, Aave’S founder. However, Aave accepted a liquid restaking token as collateral; the backing of this token was lost on an bridge Aaves does not control and that it’s support disappeared on. either way, the depositors lose both ways to .
Since these lent terms were yield-based and represented increasing share of Ethereum’s locked value, liquid restaking tokens were whitelisted throughout every major lending protocol.
The risk models priced them like peg in normal conditions. But no one of them shrewd the deal The collateral goes to zero because a bridge on ‘a chain Aave does not touch got exploited on Saturday’.
A “$AAVE is the backbone of DeFi, has billions in there and pretty much every single new de Fi infrastructure on new chains is a fork of it,” trader Altcoin Sherpo wrote on X. The whole system is very fragile,’ said $AAVE when it has contagion risk. He said ‘Although s are in the line, “
What is the token price that is now trying to answer “Is Umbrella big enough to cover the hole” and whether stkAAVE holders who back that reserve are about to eat the loss?
Thanks for reading Aave records $6 billion TVL drop as Kelp hack exposes structural risk at DeFi lender
