Mantle Weighs 30,000 ETH Credit Facility to Cover Aave rsETH Exploit Fallout
In a bid to offset significant losses stemming from the recent rsETH exploit, Aave DAO is poised to receive a substantial injection of up to 30,000 ETH from the Mantle Treasury, courtesy of a newly proposed emergency support package. This draft proposal, spearheaded by contributors from Mantle Core, specifically targets the bad debt accrued when attackers utilized stolen rsETH as collateral on Aave's V3 platform. By providing this facility, Mantle aims to not only stabilize Aave but also generate yields from its otherwise idle treasury assets, thereby creating a symbiotic relationship between the two entities.
On April 18, a devastating exploit occurred involving Kelp DAO's rsETH bridge, which saw attackers successfully mint 116,500 unauthorized rsETH, valued at approximately $292 million at the time of the incident. An investigation revealed that the vulnerability lay in the LayerZero bridge setup, which employed a 1-of-1 DVN verifier structure. This weakness allowed a single verifier to approve cross-chain messages without undergoing proper validation, enabling the attacker to swiftly navigate across various DeFi protocols.
According to the proposal, a substantial 89,567 rsETH were used as collateral on Aave V3 following the exploit, with the attacker subsequently borrowing a array of assets, including WETH, wstETH, and stablecoins, totaling nearly $190 million. Citing a report by LlamaRisk, the draft estimates that Aave's potential bad debt could range from $123.7 million to $230.1 million, pending the distribution of losses across the protocol.
Under the proposed terms, Mantle Treasury would extend a loan of less than 30,000 ETH to Aave DAO, with Aave Labs or another authorized entity acting as the borrower. The interest rate would be pegged to Lido yield plus 1% APR, unless both parties agree to alternative terms. The loan's maturity period could span up to 36 months, with Aave retaining the option to repay the loan early without incurring penalties.
To mitigate potential risks, Mantle has incorporated several safeguards into the proposal. All ETH under the loan would be transferred to a multisig wallet, selected by Mantle, with the treasury holding first-priority security rights over the wallet. Additionally, Aave would be required to contribute extra collateral, comprising 5% of protocol revenue and AAVE tokens valued at a minimum of $11 million. Mantle would also retain a signing key for the wallet or SAFE, ensuring an added layer of security.
In the event of default, triggered by missed payments, insolvency, or contract breaches, the loan would become immediately due. Furthermore, Mantle would receive delegation of 130,000 AAVE tokens, granting voting access within the Aave community during the loan period. This strategic partnership is expected to foster stronger ties between Aave and Mantle, potentially leading to increased TVL and user activity across Mantle's DeFi ecosystem. The treasury interest generated from this deal could also support future MNT burns or ecosystem funding, aligning with Mantle's broader strategic objectives.
As the proposal is currently in the pre-discussion stage, community members are encouraged to review the loan's terms, including duration, pricing, and risk exposure, before the proposal progresses to a formal governance vote. Mantle has invited users to discuss and signal their support for the proposal, paving the way for a Snapshot vote to determine the fate of this emergency support package.