Mantle has pitched a safety net for Aave DAO: a proposed loan of up to 30,000 ETH from the Mantle treasury intended to help cover bad debt stemming from last month’s Kelp DAO exploit.
The proposal, filed Thursday as “MIP-34” by the Mantle Core Contributor Team, would be dedicated solely to resolving rsETH-related shortfalls on Aave V3. Mantle frames the facility as both crisis support for Aave and a way to put otherwise idle treasury funds to work as a yield-generating asset — while potentially deepening collaboration and accelerating Aave’s deployment on the Mantle Network.
Key terms and mechanics (as outlined in MIP-34)
- Size: up to 30,000 ETH from Mantle Treasury, earmarked for rsETH bad debt on Aave V3 only.
- Interest: an indicative rate tied to Lido staking APR plus a 1% premium; final rate to be negotiated.
- Maturity: up to 36 months, with Aave allowed to prepay without penalty.
- Security: funds would be secured in a multisig wallet selected by Mantle; Mantle would hold a first-priority lien and security interest.
- Additional collateral: Aave must place 5% of its revenue and at least $11 million worth of AAVE tokens into the wallet. In the event of default, Mantle says the loan would become immediately due and payable.
- Uses of interest: Mantle suggests interest proceeds could flow to the Mantle treasury for MNT token burns or ecosystem funding, aligning the loan with Mantle’s broader treasury strategy.
Support and industry context
Bybit CEO Ben Zhou publicly backed the proposal, calling for industry solidarity. “When we got hacked, the industry got together and helped us,” Zhou said, adding that reciprocation is “the only right thing” to do in hard times. Bybit is a major supporter and strategic partner of Mantle.
Why the loan is needed
The proposal follows an April 18 exploit of Kelp DAO’s LayerZero-powered bridge that saw 116,500 rsETH tokens minted without authorization — roughly $292 million at the time. The attacker then supplied the stolen rsETH as collateral on Aave V3 and borrowed 82,650 WETH and 821 wstETH, exposing Aave to significant bad debt. Aave’s incident review estimated two potential bad-debt scenarios — roughly $124 million or $230 million. Onchain analysts later reported the attacker swapped about $175 million of the stolen ETH into BTC through THORChain and other venues.
Broader industry relief
The incident prompted multiple DeFi actors to pledge support. Notable contributions include:
- Lido: proposed up to 2,500 stETH
- EtherFi Foundation and Aave founder Stani Kulechov: each pledged 5,000 ETH
- Golem Foundation: 1,000 ETH
- Frax Finance: preparing a contribution
If approved by Mantle stakeholders and accepted by Aave, MIP-34 would be one of several cross-protocol relief efforts that underscore growing coordination within DeFi when systemic incidents occur. Mantle’s proposal couples financial assistance with strong security and collateral requirements, aiming to reduce downside risk while keeping treasury capital productive.
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