Aave nearly closed the gap after the Kelp DAO hack 🚀

After the high-profile incident with Kelp DAO, the Aave protocol took one of the key steps toward stabilizing the situation. The platform liquidated the remaining rsETH positions linked to the hacker on Ethereum and Arbitrum. According to the estimate of Thaddeus Pinakiewicz of Galaxy Digital, after this Aave is approximately 10% away from the full recovery of coverage for rsETH.

What exactly happened

This concerns the liquidation of the residual collateral that was tied to the $293 million exploit from April 18. Aave described this as a critical stage in the recovery plan. The liquidated collateral was transferred to the multisig Recovery Guardian, and the process itself, according to the platform, did not affect the funds of ordinary users and did not require the launch of the Umbrella mechanism. It also involved the release of around 13,000 ETH.

Why this matters

For Aave, this story was not just an external incident. After the rsETH hack, the hacker used the stolen assets as collateral on the lending platform, because of which the protocol received a large bad debt and faced a wave of liquidity outflow. Against this backdrop, the current liquidation looks like a turning point: the market sees that the scenario of a total collapse did not materialize, and that the recovery has already moved from theory into a practical phase.

What this means for the market

This case shows how painful for DeFi the risk of collateral tied to a complex cross-chain infrastructure remains. If earlier such assets were often perceived as a normal part of the market, now any major incident immediately hits trust in the lending model, reserves, and loss coverage mechanisms. For Aave, the good news is that the protocol is moving toward restoring financial balance.

• Aave liquidated the hacker’s rsETH positions on Ethereum and Arbitrum
• about 10% remains until the full recovery of coverage
• the incident became a resilience test for the entire DeFi segment

Conclusion

The story with Kelp DAO left a heavy mark, but Aave has already moved closer to the point where bad debt stops looking like a systemic threat. There is still no full closure of the gap, but the liquidation of positions significantly reduced the shortfall. For the market, this is a signal that even after major blows, DeFi protocols can return to stability if the recovery plan is moving not only in words, but also onchain.