What to Know:
- Kelp DAO announced that it is opening withdrawals for its liquid staking token called rsETH.
- Users will be able to withdraw their tokens after Kelp and Aave started refilling a bad debt with proper backing for tokens.
- In the short time, the DeFi platform will also open deposits for rsETH tokens along with exchange rates.
On May 14, Kelp DAO announced in the latest post on X that the platform is resuming withdrawals for its liquid staking token called rsETH. This comes amid the ongoing efforts of restoring normal operations after facing a bizarre exploitation in April that created turmoil across the protocol and other DeFi protocols like Aave.
According to the latest announcement, the platform is also restoring the bridging service, and users will be able to claim their tokens.
“Exchange rates will be updated around 4:30 pm CET on May 15th, along with eigen claims. This should reflect all staking rewards accrued to rsETH holders during the pause,” stated in the post.
Users Can Now Withdraw Their rsETH Tokens
This announcement means that users will now be able to withdraw their rsETH tokens for underlying cryptocurrencies like ETH. The steady refill of funds will ensure smooth withdrawals without triggering a liquidity shortage.
Last month, the North Korea-based Lazarus Group exploited a loophole present in the Kelp DAO cross-chain bridge built on LayerZero. In this cyberattack, hackers stole approximately 117,132 rsETH, which was worth around $292 million.
After stealing rsETH tokens from Kelp DAO, hackers used these tokens on lending platforms such as Aave to borrow Ethereum and other tokens. This action created bad debt and sparked liquidity problems in the decentralized finance sector.
In order to avoid further damage during this attack, Kelp DAO quickly paused its smart contracts on the Ethereum main blockchain network and other L2 chains to protect its users. While most of the rsETH tokens were fully backed, the platform imposed a temporary pause on withdrawals and some other operations.
Kelp DAO Implements New Security Updates
On May 13, Kelp DAO and Aave announced the completion of the first tranche for the replacement of rsETH tokens by Aave into the LayerZero OFT Adapter on the Ethereum mainnet network. By doing this, the platform has restored the bridging service, which allows users to transact rsETH between the main network and Layer 2 networks.
Kelp announced that rsETH contracts will also be unpaused for withdrawals within the next 24 hours. After this, the platform is also planning to open deposits in the next 48 hours. Users will also be able to get staking rewards that have been generated during the pause period. The remaining funds will be transferred gradually over the next two weeks from the Aave Recovery Guardian, along with the Kelp. This transfer will slowly refill the bad debt.
In order to resolve the issues of bad debt, Kelp DAO and Aave are working closely with other DeFi platforms. Aave is playing a major role in this recovery effort.
Aave has burned the hacker’s rsETH holdings on the Arbitrum network to avoid additional tokens. The lending platform is also using its Recovery Guardian multisignature wallet to send replacement tokens. Aave has also launched a new project called DeFi United to complete a structured two-week refill process.
This collaboration between different DeFi entities is making sure that there is a full backing for rsETH with collateral on both the main network and all other L2 chains. This process also involves a vote by the Arbitrum DAO, along with many other steps, to release funds that had been frozen.
In order to prevent such cyber attacks in the future, Kelp has implemented security measures. The new updates require approval from 4 independent attestors instead of just 1, which was the main reason behind this cyber attack. At the same time, the block confirmation has also increased from 42 to 64.
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