Proposal for Release of Frozen ETH
Several organizations including Aave Labs and Kelp DAO have submitted a proposal to the Arbitrum DAO requesting the release of 30,765.67 ETH, which is approximately valued at $71 million at current Ethereum prices. This sum had been frozen by the Arbitrum Security Council after being associated with the exploit that affected Kelp DAO. The purpose of releasing these funds is to facilitate the recovery plan initiated to address the damages from the approximately $292 million exploit.
Recovery Initiative: DeFi United
The proposed plan aims to allocate the released ETH to a recovery initiative called DeFi United, which was specifically created in response to the exploit. The funds would be held in a secure wallet managed by a Gnosis Safe that involves multiple parties, namely Aave, Kelp DAO, and Certora. These funds are intended solely for the purpose of restoring the economic stability of rsETH, a token linked to the Kelp DAO.
Next Steps and Community Concerns
In the event that the recovery efforts do not progress as intended, the authors of the proposal have stated they would seek guidance from the Arbitrum governance body for next steps. Kelp DAO expressed on social media that any release of ETH brings them closer to ensuring full compensation for rsETH holders.
Moreover, the proposal provides insight into the activities of the exploiter of the Kelp DAO hack who reportedly used Aave platforms to their advantage. The attacker had placed 89,567 rsETH as collateral and borrowed 82,650 WETH along with 821 wstETH from Aave’s markets, impacting both Ethereum Core and Arbitrum V3 operations. Aave has assured the public that its smart contracts have not been compromised during this incident and frames it as an external attack rather than a failure in their lending operations.
Urgency and Indemnification Clause
There is a sense of urgency as the release process can be prolonged, possibly up to 49 days, due to the necessary steps involved in Arbitrum’s Constitutional AIP process, which includes discussions and voting among community members. Some delegates, including Nicksta, have raised concerns that such a delay could adversely affect users who currently hold positions on Aave. Griff Green, a member of the Arbitrum Security Council, advocated for quicker action, suggesting the community move forward via Snapshot to gauge the community’s stance swiftly before the final decision.
The proposal also mentions an indemnification clause from Aave Labs that covers protections for the Arbitrum Foundation, Offchain Labs, and members of the Security Council in connection to this recovery effort.
