How to Save Millions: Three Plans for Kelp DAO and Aave After the Hacker Attack
Following a massive hacker attack that cost the decentralized finance protocols Kelp DAO and Aave hundreds of millions of dollars, 0xngmi, co-founder of the DeFiLlama analytics platform, proposed three realistic scenarios for recovery. These plans are not merely technical fixes—they represent complex trade-offs between fairness, sustainability, and project survival.
Why This Matters Beyond Investors
The hacker attack didn’t just affect "numbers on a screen"—it impacted real money entrusted by ordinary people to these protocols. If the recovery is mishandled, it could erode trust across the entire decentralized finance (DeFi) ecosystem. But if handled well, it could become a landmark example of how a community can respond to catastrophe without a central regulator.
DeFi protocols operate like digital banks with no single owner: decisions are made by member votes, and code replaces law. But when a breach occurs, accountability blurs—and the critical question arises: who should bear the losses? That’s precisely what 0xngmi is trying to answer.
Three Paths Through the Crisis
First scenario: Partial debt forgiveness. In this approach, the project acknowledges that some funds cannot be recovered and creates a "bad debt" bucket of approximately $216 million. To stay solvent, the team could:
- Secure loans backed by remaining assets;
- Sell a portion of their reserve tokens;
- Or combine both methods.
This resembles how a bank might sell offices and take on debt during a crisis to repay at least part of its depositors’ funds.
Second scenario: Targeted non-compensation. Priority is given to users on the most active networks—Arbitrum, Mantle, and Base—where the majority of Aave’s assets are concentrated. Here, the "bad debt" could rise to $341 million, but core users would be protected. Everyone else would not. It’s a harsh but pragmatic choice: save the system’s core, even if the periphery suffers.
Third scenario: The most optimistic. This assumes part of the stolen funds ($124 million on the main Ethereum network and $18 million on Arbitrum) can be recovered. If the hackers haven’t fully moved the funds—or if developers find a way to freeze these transactions—total losses could drop to $91 million. But success depends entirely on technical feasibility, which remains unproven.
What’s Critical
- The attack is linked to Lazarus, a North Korean group known for cryptocurrency thefts.
- Total losses exceed $300 million, affecting two of the largest DeFi protocols.
- None of the scenarios guarantee full fund recovery—all require painful trade-offs.
- Success hinges on community alignment, not the actions of a single individual or company.
- The chosen strategy will shape trust in DeFi as a whole.
What This Means for Ordinary People
If you hold cryptocurrency in DeFi protocols, this situation is a reminder: even the most seemingly secure projects can be vulnerable. No system is immune to hackers, especially when it’s decentralized and lacks a central authority. At the same time, crises like this test whether a community can act collectively—without governments, banks, or insurers. For everyone else, it’s a vital lesson in how new financial systems work—and why security in them is a shared responsibility, not someone else’s burden.
— Editorial Team
