- Aave's DeFi United campaign has raised more than $300 million to address the fallout from a devastating April 18 hack.
- Major DAOs, businesses and crypto entrepreneurs have pledged money.
- But the effort hasn't been without controversy.
A version of this story appeared in The Decentralised newsletter on April 28. Sign up here.
There’s been a silver lining to this month’s devastating Kelp DAO/LayerZero hack: DeFi United, an impromptu, crowdsourced recovery fund.
The fund, orchestrated by Aave, has tentatively raised more than $302 million to date, much of it from DAOs and crypto businesses within the blast radius of the hack.
That’s enough to fully cover the April 18 exploit, in which hackers affiliated with North Korea stole some $293 million in rsETH from Kelp DAO by targeting its faulty implementation of a LayerZero-provided bridge — technology that lets Kelp move assets between different blockchains.
The hackers deposited $200 million of the stolen assets as collateral on Aave and borrowed large amounts of Ether. This left Aave with at least $177 million in unrecoverable bad debt.
Aave wasn’t hacked, but it may have been the prime victim. Its deposit base fell by nearly 50% as spooked investors withdrew their crypto.
Aave Labs CEO Stani Kulechov said he would contribute 5,000 Ether worth about $11 million to the DeFi United fund. Other Aave contributors have also pledged money to the effort.
Arbitrum DAO, Mantle, and Consensys have pledged at least 30,000 Ether apiece. Ether.Fi and Lido DAO have pledged 5,000 and 2,500, respectively. Kelp DAO and LayerZero have also said they would pitch in.
More surprising, however, is the fact that businesses and people largely unaffected by the hack have also jumped in to help.
Though they haven’t contributed to the fund, the Solana Foundation and Tron founder Justin Sun both plan on depositing stablecoins in Aave, a move that can help stabilize lending markets there. Both name-checked DeFi United when announcing the moves.
Count crypto VC Haseeb Qureshi among those heartened by DeFi’s kumbaya moment.
“I might have to take back everything I said criticizing Ethereum rainbows and unicorns,” he said, referring to the vaguely utopian and communal ethos among many prominent Ethereum developers.
“Sometimes rainbows and unicorns are exactly what a community needs. Very surprised this all came together through donations.”
But it hasn’t been without controversy.
Michael Bentley, the former CEO of Aave competitor Euler Labs, called it “good marketing.”
“'DeFi United’ has a much nicer ring to it than ‘bailout,’” he wrote on X.
The effort has even been controversial in the Aave governance forum.
TokenLogic, an Aave DAO service provider, proposed contributing 25,000 Ether — worth $57 million on Tuesday — from the cooperative’s treasury.
But some members had concerns. Tokédex founder Robby Greenfield noted that it asks much of the DAO “without requiring, as a precondition, any systemic reform to prevent the exact same failure from recurring.”
Other members had similar qualms. Still, TokenLogic advanced the proposal to the voting stage, arguing that changes to Aave’s risk management practices were a separate, parallel conversation.
“Conditioning disbursement on deliverables in a separate workstream would introduce delays and ambiguity at a moment that requires broader, industry-wide, aligned action,” it wrote on the forum. Voting began today.
The hack caused a crisis of confidence in crypto. The recovery effort provided a much-needed boost of morale. Now, we have to wait and see whether the whole fiasco will lead to the kind of reform that can turn this niche corner of world finance into a mainstream product.
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Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.
