The Ethereum Foundation exchanged 21,269 aWETH from its Aave lending position for 17,254 wstETH in a transaction with Mellow and Lido Finance. Mellow is a vault curator for Lido's EarnETH vault, which generates yield through looping strategies, where it borrows WETH against wstETH collateral to multiply staking exposure.

The KelpDAO exploit drove Aave's WETH market to peak utilization, causing borrowing rates to spike sharply and hurting previously profitable vault positions. Mellow obtained aWETH to pay back the vault's WETH debt on Aave without needing to sell wstETH on the open market. The swap brought EarnETH's outstanding WETH debt on Aave from approximately 82,000 to 62,000 WETH, improving the vault's health factor. Disclosure: Lido is a current sponsor of ETH Daily.

EarnUSD is a stablecoin vault by Lido for earning transparent, onchain USD-denominated rewards. Get started today at stake.lido.fi/earn

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Aave service provider TokenLogic published a governance proposal to allocate a 25,000 ETH contribution from the Aave DAO treasury toward DeFi United, a coordinated recovery effort aimed at fully restoring the backing of KelpDAO's rsETH. Aave calculates a residual funding gap of approximately 75,081 ETH, after accounting for 30,766 ETH frozen by the Arbitrum Security Council and expected liquidation recoveries from the attacker's positions on Aave and Compound.

DeFi United is led by Aave service providers and includes contributions from Lido, EtherFi, Ethena, Ink, BGD Labs, Stani Kulechov, Emilio, Ernesto, and the Golem Foundation, with additional pledges expected. Mantle has separately committed a 30,000 ETH credit facility to the coalition. With Aave's 25,000 ETH contribution added, approximately 5,511 ETH of the residual gap remains, which the coalition expects will be covered.

Any additional public donations received after the proposal is approved will not reduce Aave's treasury commitment, instead it will be directed toward repaying Mantle's credit facility. Once gathered in full, the coalition will place the full 120,015 ETH into the LayerZero lockbox to execute the recovery. The proposal will advance to a Snapshot vote by AAVE token holders.

EarnUSD is a stablecoin vault by Lido for earning transparent, onchain USD-denominated rewards. Get started today at stake.lido.fi/earn

Disclaimer: Content is for informational purposes only, not endorsement or investment advice. The accuracy of information is not guaranteed.

Mantle, an Ethereum L2, published a governance proposal offering a loan of up to 30,000 ETH to Aave DAO to help address bad debt from the KelpDAO LayerZero exploit. The loan would carry a variable interest rate of the Lido staking yield rate plus 1% APR, with a maturity of up to 36 months and early repayment permitted without penalty.

The loan allows the Mantle Treasury to receive yield to generate a positive risk-adjusted return on unallocated treasury assets, with proceeds directed toward MNT burns or ecosystem funding. Mantle would also be delegated 130,000 AAVE tokens for governance participation during the loan period. The proposal is currently open for community discussion ahead of a formal Snapshot vote. The Aave v3 Mantle WETH market currently faces the largest estimated bad debt among all impacted markets.

EarnUSD is a stablecoin vault by Lido for earning transparent, onchain USD-denominated rewards. Get started today at stake.lido.fi/earn

Disclaimer: Content is for informational purposes only, not endorsement or investment advice. The accuracy of information is not guaranteed.