Lido floats a $6M stETH backstop to help cover rsETH deficit after $290M KelpDAO exploit

KelpDAO's liquid restaking token rsETH has become the focus of a major DeFi rescue effort following a hack estimated at about $290 million. On Thursday, Lido Finance submitted a proposal to Aave's Research Forum, positioning itself as the first publicly confirmed participant in Aave's coordinated response to the rsETH shortfall tied to this week's LayerZero bridge exploit. The April 18 incident left rsETH undercollateralized, pushing risk into multiple lending markets. Aave has been organizing an ecosystem-wide initiative dubbed "DeFi United" aimed at making affected users whole. In a post on X (formerly Twitter), Aave said it had already secured "multiple strong indicative commitments." Lido's proposal authorizes a one-time, capped contribution of up to 2,500 stETH, valued at roughly $6 million at the time of reporting. Aave described the effort as a fully funded recovery package rather than a partial patch, designed to contain spillover and enable an orderly resolution. The terms for Lido's contribution are restrictive. Funds would be deployed only if the relief vehicle is large enough to cover the entire deficit, which is described as exceeding 100,000 ETH. Any unused amount would be returned to Lido's treasury, and the funds may only be used to address the rsETH shortfall. Lido's stake in the outcome reflects product exposure: its EarnETH vault has direct exposure to rsETH. Without coordinated support, losses for users in that vault could reach about 9,000 ETH. As planning continues, Aave has taken steps to limit additional risk. Earlier Thursday, it said rsETH reserves were paused across multiple environments, including Ethereum Core, Arbitrum, Base, Mantle, and Linea. Market impact has been sharp. Since the heist news surfaced on Saturday, Aave has reportedly seen about $9 billion in net outflows as of April 21. TVL on the platform dropped more than a third to roughly 17.5 billion, and later slid further to around 14.3 billion at the time of writing. The shock extended beyond Aave: DefiLlama data shows TVL across decentralized lending protocols fell by about $13 billion within 48 hours of the exploit. Featured image from OpenArt, chart from TradingView.com