Ethereum's Kelp and Aave Progress in Restoring rsETH Backing After Exploit

Ethereum liquid restaking platform Kelp and decentralized lending protocol Aave have taken significant steps to restore the backing of rsETH, including the burning of the exploiter’s rsETH tokens. According to Cointelegraph, Kelp DAO outlined a recovery plan for its liquid staking token rsETH, confirming that the hacker’s tokens were burned on the layer-2 Arbitrum network. The 117,132 rsETH, valued at approximately $278 million, will be replenished over two weeks from Aave Recovery Guardian, a multisignature wallet managed by the DeFi United recovery group and Kelp’s recovery safe, into the LayerZero OFT adapter. This smart contract facilitates the locking, minting, burning, and releasing of rsETH during cross-chain transfers. Kelp DAO assured that rsETH on mainnet and layer-2 networks, with a market capitalization of $1.5 billion, remains fully backed. This recovery effort aims to assist users affected by one of the largest DeFi exploits this year. Kelp experienced a hack in April, attributed to North Korea’s Lazarus Group, which exploited its rsETH adapter bridge contract, draining approximately $293 million. Blockchain security firm OpenZeppelin noted that no smart contract bug was publicly identified, highlighting an operational failure, a risk often underestimated in the DeFi industry. Kelp announced that withdrawals would resume "tentatively within 24 hours" after the first tranche is returned to the smart contract. All rsETH operations, including deposits, redemptions, bridging, and claims, will continue as usual once the contracts are reactivated. The protocol has completed a "security hardening pass," with bridging security now requiring four independent attestors and 64 block confirmations, while some layer-2 routes have been deprecated. Kelp is also migrating to Chainlink’s Cross-Chain Interoperability Protocol (CCIP) for enhanced cross-chain bridging security. Kelp, a notable liquid restaking protocol on Ethereum, is primarily built on EigenLayer, allowing users to deposit ETH or other supported liquid staking tokens for additional yields. The protocol’s total value locked reached an all-time high of just over $2 billion in September 2025 but has since decreased by about 26% to $1.55 billion, as reported by DeFiLlama. Cointelegraph noted that ETH derivatives traders remain steady and have not turned bearish despite recent DeFi exploits. However, spot prices have declined by around 1% on the day, with Ether dropping to a 12-day low of $2,260 in late trading on Tuesday.