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.

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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.

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Aave service providers have launched a deficit relief initiative called DeFi United, designed to fully cover the underbacked rsETH liquid staking token from KelpDAO. The initiative includes contribution pledges from several ecosystem projects: EtherFi has committed 5,000 ETH, Lido 2,500 ETH, and Golem 1,000 ETH.

Aave founder Stani Kulechov also personally pledged 5,000 ETH (approximately $11.6 million), emphasizing that Aave represents his life's work. Additional participants, including Ethena, Ink Foundation, Tydro, and LayerZero, have announced participation, though have not specified their contribution amounts.

The rsETH asset is facing an estimated shortfall of 118,000 ETH following the KelpDAO exploit executed by the DPRK. Arbitrum also recovered 30,000 ETH connected to the exploit, which could be directed toward DeFi United. 75,700 ETH has already been swapped by the DPRK via THORChain. Kulechov called for THORChain to contribute the roughly $450,000 in swap fees generated from those transactions to support DeFi United.

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