Aave Completes Phase I Recovery, Enters New Phase

Aave, a decentralized lending protocol, has made significant progress in recovering from the recent exploit on Aave V3. In its latest update, the protocol confirmed that it had liquidated eight hacker-linked positions tied to the Lazarus Group's attack. This marks the completion of Phase I of the recovery plan.

The next phase, Phase II, aims to restore rsETH backing and reopen bridge operations. To achieve this, Aave will burn the seized rsETH on Arbitrum and transfer the recovered ETH to an Aave-controlled wallet. On Ethereum, the seized rsETH will be transferred into the bridge lockbox, which will be fully backed once sufficient ETH is committed by members of the DeFi United coalition.

The recovery plan also includes the retirement of the LayerZero packet on Ethereum to prevent further minting of rsETH through the exploit-linked cross-chain message. This move is expected to neutralize the inflated rsETH supply created during the attack.