LlamaRisk, an Aave DAO Risk Service Provider, released its rsETH Incident Report, quantifying the potential bad debt impact on Aave under two scenarios:
1. Uniform loss socialization across all rsETH
~15.12% haircut, resulting in approximately $123.7 million in bad debt, with the largest absolute loss on Ethereum Core and the highest proportional shortfall on Mantle.
2. Losses isolated to L2 rsETH
~73.54% haircut, resulting in approximately $230.1 million in bad debt, concentrated on L2s. Mantle would face a 71.45% WETH shortfall and Arbitrum a 26.67% shortfall, while Ethereum Core would remain unaffected.
The report also notes that WETH reserves across chains are at 100% utilization with under $20 of idle liquidity, limiting liquidation capacity and potentially amplifying risk. It recommends pausing the WETH Umbrella module, with bad debt to be addressed jointly by the $AAVE DAO treasury and ecosystem participants.
