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- 🐳 Weekly Edition: Aave is So Back
🐳 Weekly Edition: Aave is So Back
A North Korean-exploit left hundreds of millions in bad debt on DeFi bluechip Aave, but the hole has now been filled thanks to donations from the community
Beluga & Will McKinnon
April 24, 2026
As we discussed in Monday’s edition, a DPRK-affiliated hacker group managed to exploit KelpDAO’s LayerZero bridge for $290M in unbacked rsETH, which it then deposited to Aave as collateral. By the time TradFi markets opened Monday, Aave was left holding the bag of hundreds of millions in bad debt, with over $6B in user capital already withdrawn from the platform and the AAVE token down 16%.
Aave’s emergency “Umbrella” fund was only worth $70M, so it seemed the only available routes would rely on socializing the losses among users. Aside from the obvious capital losses they’d incur, it would have eroded the trust Aave has built up over the years; it’s no secret DeFi has been a hotbed for hacks, but they were always regarded as the “safe” option and the bluechip above all others.
And then, something nobody expected happened: instead of recouping the losses from users, major protocols banded together to seed the DeFi United relief fund to effectively socialize the losses among themselves. Assuming the relevant proposals pass, the hole has now been filled almost entirely by almost 70,000 ETH in donations.
As Bybit’s (parent company of Mantle) Ben Zhou said while pledging up to 30,000 ETH, “When we got hacked the industry got together and helped us. It is the only right thing that we do the same.” Sure, most of the donors run businesses directly linked to Aave and would suffer sever consequences themselves were the hole not filled, but a tradition of reciprocity is incredibly important in an industry where we largely police ourselves.
In other words, what looked like a doomsday situation has turned into a testament to the strength of our community. Admittedly this solution feels more like a TradFi-style bailout than a crypto solution, but hey maybe that means we’re growing up?
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