The DeFi United coalition has published a detailed plan to restore rsETH token backing. The plan aims to fully recover reserves without socializing losses among users.
The DeFi United coalition has published a detailed plan to restore rsETH token backing. The steps follow the attack on the Kelp DAO protocol, which resulted in the issuance of 116,500 unbacked rsETH worth approximately $293M.
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The plan aims to fully restore reserves without socializing losses among users.
Technical Recovery Plan
DeFi United plans to convert raised Ethereum (ETH) into rsETH in tranches and direct them to the bridge’s lockbox contract. This will restore backing to the nominal ratio of 1 rsETH = 1.07 ETH▼$1,776.01.
In parallel, the coalition will conduct a controlled liquidation of the attacker’s eight positions on Aave (Ethereum and Arbitrum) and similar positions on Compound. To do this, the rsETH price oracle will be temporarily adjusted.
Funds recovered from the liquidations will be returned to the protocol pools. This will restore approximately 13,000 ETH on Aave and 16,776 ETH on Compound.
After all stages are complete, the rsETH oracle will return to standard values, and WETH and rsETH reserves will be unlocked.
Read more: Aave and DeFi Giants Pledge ETH After Kelp Hack
Implementation Risks
The plan carries certain risks. Its success depends on community approval of proposals, timely signing of agreements, and the absence of interference from the attacker during position liquidation.
Additionally, new security measures implemented by LayerZero and Kelp DAO have not yet been fully tested in “combat” conditions. To minimize risks, converting ETH to rsETH and making lockbox deposits will be carried out in multiple tranches.
DeFi United has promised to publish updates on recovery progress as each stage is implemented.
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