Lido Proposes $5.8M Contribution to Address Kelp rsETH Deficit from LayerZero Exploit

Gate News message, April 24 — Lido Labs is seeking DAO approval to allocate up to 2,500 staked Ethereum (roughly $5.8 million) to reduce the rsETH deficit caused by the recent Kelp exploit, according to a proposal posted on Thursday. The contribution would be made available only as part of a fully funded recovery package intended to close the rsETH shortfall in full.

The Kelp DAO rsETH bridge suffered a LayerZero-based exploit last week that resulted in approximately $292 million in losses. The attack created material backing shortfalls for rsETH and triggered broader second-order effects across DeFi. Aave experienced significant contagion, with attackers using stolen Kelp-linked assets as collateral; the platform’s total value locked fell by nearly $8 billion, leaving approximately $195 million in bad debt. The rsETH deficit has also created market rate pressures, elevated borrow and lending stress, and risks of forced unwinds for users in vaults and looping strategies.

Lido Labs said the total rsETH deficit exceeds 100,000 ETH, with the recovery vehicle expected to include multiple contributors. Lido DAO will participate as one of several stakeholders rather than as the sole backstop provider. Shortly after Lido’s proposal, the EtherFi Foundation proposed contributing 5,000 ETH for additional relief.

The Kelp exploit has prompted industry discussion on DeFi security and contagion risks, with some analysts noting that repeated hacks and institutional hesitation are pushing investors toward stablecoins.