After the incident with KelpDAO on April 18, 2026, Aave's founder Stani Kulechov repeatedly emphasized that the protocol wasn't hacked and remained uncompromised. However, that didn't save the situation. Over the next four days, nearly $10 billion was pulled out of Aave, with some liquidity flowing into other projects, including Fluid.
While Aave faced issues, its pools were essentially empty, withdrawals were halted, and lenders were stuck with unwanted collateral. Against this backdrop, Fluid launched the WETH Redemption Protocol without any announcements.
The idea turned out to be unexpectedly successful. In a simplified version, it worked like this: the lite storage Fluid used wstETH as collateral for a loan in ETH on Aave. As a result, mirrored positions formed that directly matched the positions of users stuck in Aave.
This allowed users to bypass restrictions. They could transfer their collateral in ETH and receive wstETH or weETH in return, without waiting for the Aave pools to unlock.
Fluid is taking the initiative.
According to Castle Labs, in just two days, the Fluid redemption protocol processed 166,722 aETH, which is about $400 million. On-chain data from Dune showed a sharp spike in aETH collateral swap volume from April 20 to April 21. During that period, it exceeded 84,000 ETH, and later Castle Labs revealed the full statistics in their post on X.
After that, Fluid scaled its solution on the Arbitrum and Base networks. They launched a queuing system that allowed traders to carefully close risky positions while lenders could access the assets they needed.
On L2, the mechanics changed slightly; such networks require more manual debt management. But the core idea remained the same.
When the team was asked whether this was a one-time measure or the start of a new direction, they drew an analogy with traditional finance. There have long been instruments like credit default swaps for such situations.
According to Fluid, DeFi should also have its own equivalents of such solutions. And although no one planned the crisis, it demonstrated best how it can work in practice.
How badly did Aave get hit?
The figures after the incident speak for themselves. The total funds in Aave dropped from $45.8 billion to $35.7 billion. TVL fell from $26.3 billion to about $16.4 billion, a decrease of around $9.94 billion.
Due to the pools being effectively drained, lending rates in stablecoins skyrocketed. This only intensified the pressure on the protocol. Liquidity was lacking, withdrawals were restricted, and users began borrowing against their locked assets to mitigate their losses. As a result, rates continued to rise.
The drawdown affected not only Aave. The total TVL in DeFi dropped from $99.5 billion to approximately $86.7 billion. This is a minimum for over a year and a drop of 37% from the $119 billion recorded in early 2026. The incident with KelpDAO wasn’t the only cause, but according to Castle Labs, it was a key factor. Aave suffered the most.
Part of the capital, however, did not disappear from the market. According to on-chain data from Lookonchain, the TVL of the Spark protocol rose to $4.552 billion, gaining about $825 million amid the outflow from Aave. DefiLlama also tracks this trend, showing a sharp increase since April 19, while most other projects saw declines during this period.
Is everything going to be alright with Aave?
Aave launched V4 on the Ethereum mainnet on March 30. The update brought a new liquidity architecture and a revamped collateral system. Now, bridge tokens require confirmation under a 3 out of 5 DVN model.
Only 11 days remained before the attack on KelpDAO from the launch date. On this background, the project was already in a tough spot. Management issues, the departure of BGD Labs, and the disbandment of ACI took their toll.
But despite all this, Aave still holds the highest TVL in the market, even after losing nearly $10 billion. The protocol generates about $560 million in annual revenue and maintains support from major players, including Grayscale and the Bank of Canada, who connected shortly before the incident.
Aave still remains the industry leader, and key market participants expect the project to cope with the aftermath.
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