Aave has reopened WETH borrowing on its platform, signaling a step forward in recovery from the $195 million Kelp DAO exploit. That attack triggered an $8 billion plunge in total value locked across the protocol.
The $195 Million Exploit
Kelp DAO, a liquid restaking protocol, was hit by a sophisticated exploit earlier this year. The breach drained roughly $195 million in user funds, sending shockwaves through the decentralized finance ecosystem. The incident caused Kelp DAO's total value locked to collapse by $8 billion, as investors rushed to pull deposits and prices tumbled.
Investigators later traced the attack to a vulnerability in the protocol's smart contract. The exploit forced Aave, a major lending market, to temporarily suspend WETH borrowing to limit further damage. WETH — wrapped ether — is a core asset on Aave, used as collateral for loans and yield strategies.
Aave's Recovery Move
By reopening WETH borrowing, Aave is effectively restoring a key piece of its lending infrastructure. The decision comes after weeks of review and system checks. While the platform had kept borrowing paused to prevent potential losses, the green light now suggests the risk has been contained.
The move is a practical one: users can again borrow WETH against their deposits, which helps restore normal market operations. But it's also a symbolic gesture. For a protocol that prides itself on being permissionless, any suspension of core functions chips away at that promise. Reopening signals confidence in the underlying code and the broader DeFi system.
What the TVL Drop Means
The $8 billion drop in total value locked is a stark reminder of how quickly trust evaporates in DeFi. Kelp DAO had been one of the fastest-growing liquid restaking protocols before the exploit. The attack didn't just steal funds — it triggered a cascade of withdrawals that left the protocol's TVL a fraction of its former size.
That loss rippled outward. Other protocols that relied on Kelp DAO's liquidity faced tighter conditions. Aave, as a major lender, had to adjust risk parameters. The reopening of WETH borrowing is one adjustment, but the full recovery of TVL across affected platforms is still a work in progress.
For now, Aave users can once again borrow WETH. The rates and loan-to-value ratios remain under the platform's standard risk controls. But the question hanging over the market is whether trust in Kelp DAO will bounce back. Without that trust, the $8 billion hole in total value locked may take months to fill — if it ever does.
