After the $293M Bridge Hack: Two Scenarios for Aave's Crisis and What It Means for the Market
The largest crypto bridge hack this year has threatened the stability of one of DeFi's leading lending protocols. Hackers stole $293 million through the Kelp DAO bridge and then used the stolen tokens as collateral on the Aave platform to take out a $200 million loan. Analysts are now assessing the potential consequences.
Two Scenarios for the Crisis
LlamaRisk experts, who handle risk management for Aave, have proposed two ways the situation with undercollateralized debt could unfold.
Scenario 1: Even Distribution of Losses
In this case, losses are distributed among all rsETH token holders on the Ethereum mainnet and on layer-2 solutions (Arbitrum, Mantle, and others). The undercollateralized debt on Aave would be about $123.7 million, and the rsETH-to-ETH ratio could lose up to 15% of its value.
The advantage of this scenario is that losses are distributed more evenly, and Aave can use its internal safety model to cover part of the losses in wETH. The platform has already begun unfreezing 18,922 aWETH tokens (Aave Wrapped ETH) worth nearly $43.7 million.
Scenario 2: Shifting the Deficit to Layer-2 Networks
If the entire liquidity deficit is shifted to layer-2 networks, such as Arbitrum and Mantle, the volume of bad debts would skyrocket to $230.1 million. This is significantly higher than in the first scenario.
Aave's treasury holds about $181 million — these funds could be used to cover the deficit, but they still won't be enough. Experts warn that the hack could trigger a liquidity shortage, which would be exacerbated by a mass withdrawal of assets from DeFi platforms.
What Has Already Happened and How It Affects the Market
On April 18, hackers attacked the Kelp DAO cross-chain bridge, which runs on LayerZero, and stole 116,500 rsETH tokens (Restaked ETH) worth $293 million. The attackers immediately used the stolen assets as collateral on the Aave V3 platform to borrow wrapped ether (wETH).
According to Lookonchain analysts, in the three days following the hack, the value of assets on Aave dropped by $9.94 billion — from $26.372 billion to $16.432 billion. This indicates a massive outflow of funds from the protocol.
Key Takeaways
- Massive hack size: $293 million — one of the largest bridge hacks in history.
- Threat to Aave: The protocol could face a liquidity deficit of up to $230 million, exceeding its reserves.
- Risk to the entire DeFi ecosystem: Mass withdrawals from Aave could trigger a chain reaction on other platforms.
- Uncertainty of the scenario: Which of the two options will materialize is still unclear, but both carry serious risks.
- Loss of confidence: Investors may start pulling funds from DeFi protocols, leading to further liquidity decline.
What This Means for Ordinary People
If you hold cryptocurrency on DeFi platforms, especially on Aave or related ones, you should closely monitor developments. The hack could lead to temporary fund freezes or losses for depositors. For the market as a whole, this is a reminder of the risks associated with bridges and collateralized lending. Don't keep all your assets in one place and only use trusted platforms with good insurance protection.
— Editorial Team
