Aave records $6 billion TVL drop as Kelp hack exposes structural risk at DeFi lender

The AAVE token fell 16% and deposits fled the protocol after attackers used drained rsETH as collateral to borrow wrapped ether, leaving Aave to quantify how much bad debt it is now carrying.

What to know:

Aave’s total value locked plunged by about $6.6 billion and its token fell 16% after attackers used $292 million in stolen rsETH from Kelp’s bridge as collateral on Aave V3.The exploit, which did not compromise Aave’s own contracts, left roughly $196 million in Aave-specific bad debt concentrated in the dominant rsETH–wrapped ether pair on Ethereum.Aave’s Umbrella reserve may not fully cover the deficit, raising the prospect that stkAAVE holders could absorb losses and underscoring systemic risks from liquid restaking tokens across DeFi.