AAVE and ZRO tokens declined approximately 20% over one week following the Kelp DAO hack on the 18th, which exposed structural vulnerabilities in the DeFi lending and cross-chain bridge infrastructure. As of the 24th at 11:15 AM (according to CoinMarketCap), AAVE traded at $94.68 (down 16.53% weekly) and ZRO at $1.57 (down 19.92% weekly).
Kelp DAO Hack Details
On the 18th, the Kelp DAO restaking protocol was attacked through a cross-chain bridge vulnerability, resulting in the theft of 116,500 rsETH tokens valued at approximately $292 million. The attacker then deposited 89,567 rsETH as collateral on the Aave lending protocol and borrowed $190 million in ETH and related assets across Ethereum and Arbitrum.
Impact on Aave
The large-scale rsETH deposit as collateral raised concerns that some positions within Aave could transition to potential non-performing loans. In response, Aave froze related markets to contain the risk.
Cross-Chain Infrastructure Concerns
rsETH is distributed across multiple chains, with cross-chain transfers handled by LayerZero’s Omnichain Fungible Token (OFT) standard. The hack exposed vulnerabilities in cross-chain bridge structures, contributing to reduced confidence in the underlying infrastructure and placing downward pressure on ZRO.
Industry Response
The DeFi industry is currently mobilizing around the “DeFi United” initiative to raise funds for market trust recovery and stabilization.
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