The DeFi United initiative has raised over 69,550 ETH from 222 wallets across 1,623 transactions to restore the backing of rsETH, functioning as an emergency recapitalization desk for DeFi. This effort is akin to a lender of last resort, built without regulatory oversight or central authority.
Aave’s governance proposal estimates the original shortfall at roughly 163,183 ETH. Contributions and freezes have significantly reduced this gap: Kelp contributed 43,168 ETH; Arbitrum Security Council froze 30,766 ETH; Aave liquidations accounted for up to 12,323 WETH; and Compound provided 1,845 WETH.
This brings the residual funding gap down to approximately 75,081 ETH. DeFi United has secured around 92.5% of this remaining amount, leaving about 5,632 ETH unaddressed. A broader view reveals commitments totaling 100,200 ETH against a target of 116,500 ETH, achieving about 86% coverage. However, many significant contributions are pending governance approval, and some amounts remain undisclosed.
The attack on KelpDAO’s rsETH bridge involved exploiting its sole verifier configuration with LayerZero Labs. Galaxy Research identified the exploit that unlocked 116,500 rsETH from Ethereum escrow, used as collateral to borrow approximately $236 million in WETH and wstETH. This led to a drop of nearly $13 billion in DeFi’s total value locked (TVL). Aave saw its TVL decrease by about $8.45 billion, while USDT and USDC pools reached full utilization.
LayerZero described the attack as RPC poisoning targeting infrastructure used by its decentralized validator network, without pinpointing a flaw within LayerZero itself. The bridge’s reliance on LayerZero as the sole verifier remains a critical point in recovery efforts.
Contributions to DeFi United include:
– Mantle: 30,000 ETH (Pending vote)
– Aave DAO: 25,000 ETH (Pending vote)
– Stani Kulechov: 5,000 ETH (Committed)
– EtherFi: 5,000 ETH (Pending vote)
– Lido: 2,500 ETH (Pending vote)
– Golem Foundation: 1,000 ETH (Confirmed)
– Emilio Frangella: 500 ETH (Confirmed)
– BGD Labs + Ernesto: 350 ETH (Confirmed)
LayerZero’s contribution remains undisclosed but is deemed crucial due to the attack’s focus on its infrastructure.
DeFi United was assembled without regulatory or central authority mandates, showcasing cross-protocol coordination. Before Aave’s proposal reached governance, pledges totaling 14,570 ETH were already secured from various contributors.
Aave’s treasury proposal includes negotiating loans and settlements, with Mantle’s contribution structured as a credit facility to be repaid later. The Arbitrum Security Council’s frozen ETH is considered recoverable but requires further action for release.
The intervention by Arbitrum highlights the tension between decentralization and central control in crisis management. Governance debates continue over collateral risk frameworks and responsibility sharing, with some arguing that recovery efforts should not precede systemic fixes.
Two scenarios emerge:
– Bull Case: Swift governance approvals, orderly reopening of Kelp and bridge mechanics, and full recovery contributions lead to a model for cross-protocol coordination.
– Bear Case: Delays in key votes or contributions result in prolonged uncertainty and reliance on protocol politics.
The outcome hinges on Arbitrum governance, KelpDAO actions, LayerZero steps, and external DAO approvals. Users face funding, timing, and coordination risks as the rescue effort remains centralized at critical decision points despite its decentralized branding.
Ultimately, DeFi United’s efforts demonstrate the sector’s ability to mobilize for recovery faster than achieving preventive consensus, highlighting both strengths and vulnerabilities within the ecosystem.