Aave Unveils Phase 2 of rsETH Recovery Plan, Focusing on Inflation Issue Resolution

Aave has announced significant progress in its recovery efforts following the rsETH hack. The protocol has made substantial headway on both Ethereum Core and Arbitrum, with notable developments including the successful liquidation of eight attacker-controlled positions and the transfer of recovered rsETH collateral to the Recovery Guardian.

Furthermore, governance proposals for Mantle DAO and Arbitrum DAO have passed, with the latter agreeing to return over $71 million in ETH to Aave as part of a collective recovery effort. Additionally, positive legal developments are underway, with the court ordering the transfer of frozen ETH from Arbitrum DAO to Aave LLC via on-chain voting.

The next phase of the recovery plan will focus on addressing the rsETH inflation issue and restoring normal market operations. On Arbitrum, liquidated rsETH will be burned, and KelpDAO will simultaneously burn corresponding LayerZero cross-chain message packets to eliminate excess rsETH supply. On Ethereum, seized rsETH will be moved to a bridge locker, and in conjunction with ETH committed by the DeFi United Alliance, the locker will be made whole.

Following these steps, rsETH withdrawals will be reopened, and protocol parameters temporarily adjusted for liquidation will be rolled back. The remaining affected positions will be closed out in ETH form using raised funds. Additionally, the LTV parameter for WETH on Aave V3 on Ethereum Core is expected to return to normal soon.

A compensation inquiry tool has been made available for users affected by the rsETH incident to check their expected compensation amount. This tool aims to provide clarity and support for those impacted by the incident.