Aave: Launches rsETH Incident Compensation Tool, Focusing on Resolving rsETH Minting Issue and Restoring Market Functionality

May 9 — Aave has unveiled the Phase Two update for its rsETH incident recovery plan. On April 28, Aave rolled out its V3 technical recovery solution for the rsETH hack, with progress now made on both Ethereum Mainnet and Arbitrum. On May 6, 8 Aave V3 positions linked to the attacker were successfully liquidated, and the recovered rsETH collateral was sent to the Recovery Guardian per the Aave Improvement Proposal (AIP). Other users — including Umbrella stakers — were unharmed. Plus, governance proposals from Mantle DAO and Arbitrum DAO have been greenlit. The latter signed off on returning $71 million worth of recovered ETH to Aave for the DeFi United joint recovery push. Legal wins are also in the books: a court order has cleared Arbitrum DAO to send frozen ETH to Aave LLC via on-chain voting, with the restraining order to be issued after the transfer. Aave LLC is now waiting for a final court ruling. As a stopgap, the team has borrowed extra funds to cover the shortfall — ensuring users aren’t hit by delays. The next phase will target fixing the rsETH inflation problem and getting market operations back to normal: - On Arbitrum: Burned rsETH from liquidations will be destroyed, while KelpDAO will simultaneously burn the matching LayerZero cross-chain message packet — wiping out all excess rsETH supply from the hack. - On Ethereum Mainnet: Seized rsETH will be moved to a bridging lockbox, which will be topped up with ETH from the DeFi United Alliance to finish the lockbox endorsement. Once done, the bridge will resume normal operations. After that: rsETH withdrawals will open back up, protocol parameters temporarily adjusted for liquidations will revert, and remaining affected positions will be closed out in ETH using the funds raised. Also, the LTV (Loan-to-Value) parameter for WETH on Aave V3 Ethereum Mainnet will soon return to normal. A compensation check tool is now live for users impacted by the rsETH incident to look up their expected payout amount.