Aave Proposes Protocol-Wide Risk Framework After KelpDAO Exploit

rsETH Drained

116,500

Amount of rsETH drained during the KelpDAO exploit.

Borrowed Amount

$193 million

Total amount borrowed by attackers from Aave during the exploit.

Total Attacker-Posted Collateral

$221.39 million

Value of collateral posted by attackers in the exploit.

§ 01 Executive Snapshot

What: Aave proposes a protocol-wide risk framework following the KelpDAO exploit.
Who: Aave governance, founder Stani Kulechov, risk service provider LlamaRisk.
Why it matters: The framework aims to enhance asset security and prevent future exploits across Aave's platforms.

Aave's proposed risk framework will apply to all assets on Aave V3, V4, and Aave Horizon.
The new framework includes four risk layers: Asset Risk, Bridging Risk, Monitoring and Automated Risk Oracle Systems, and Chain Risk.
Following the KelpDAO exploit, assets not meeting the new standard will be removed from Aave.

The KelpDAO exploit in April saw attackers drain 116,500 rsETH and borrow $193 million from Aave, highlighting vulnerabilities in asset onboarding and bridging mechanisms.
Aave's response marks a significant shift towards more rigorous governance and risk management practices in the DeFi space, especially after recent security incidents.

Immediate consequence: Enhanced security protocols may restore user confidence and prevent future financial losses.
Long-term implication: Aave's proactive stance may set a new industry standard for risk management in decentralized finance.

Potential risk: Implementation of the new framework may face challenges in achieving community consensus or technical execution.
Potential risk: The reliance on external risk oracle systems may introduce vulnerabilities if not adequately managed.

Aave's proposals are currently in the community feedback stage, with a Snapshot vote pending.
Successful implementation of the risk framework and the migration to Chainlink CRE will signal Aave's commitment to improved security measures.

§ 07

What does Aave's proposed risk framework aim to achieve?

The framework aims to enhance asset security and prevent future exploits across Aave's platforms.

Who is involved in the proposal of the risk framework?

Aave governance, founder Stani Kulechov, and risk service provider LlamaRisk are involved in the proposal.

How will the new risk framework affect assets on Aave?

The framework will apply to all assets on Aave V3, V4, and Aave Horizon, with assets not meeting the new standard being removed from Aave.