Aave’s token repurchase program remains on hold as the lending protocol directs retained income toward repairing losses from the rsETH exploit recovery and preparing to service a credit facility of as much as 30,000 ETH from Mantle.
The pause leaves Aave’s cash flows focused on balance-sheet repair rather than buying AAVE from the market. The recovery package combined donations, a 25,000 ETH treasury contribution and temporary bridge financing to cover a shortfall created after undercollateralized rsETH was used to borrow wrapped ETH from Aave.
The debt burden has become more prominent as the protocol’s retained income has slowed. Aave generated roughly $24 million in retained income during the 144 days following the incident, or about $167,000 a day, compared with about $40.5 million in the preceding 144-day period. At that recent pace, repaying a fully used Mantle facility valued at about $79 million would take roughly 473 days if all retained income were allocated to debt service.
rseth attack created a six-figure eth hole
The crisis began on April 18, when an attacker exploited Kelp DAO’s LayerZero bridging route to mint undercollateralized rsETH and sell it across on-chain markets. The attacker subsequently deposited rsETH as collateral on Aave and borrowed substantial amounts of WETH, which were removed before the protocol could contain the exposure.
Aave froze its rsETH and wrapped rsETH markets after identifying the risk, preventing further borrowing against the affected collateral. The measure could not recover assets that had already been borrowed and transferred out.
Kelp DAO’s disclosures put the amount removed from LayerZero’s locked funds at 152,577 rsETH. Using a reference conversion rate of 1.0696 rsETH per ETH, the missing collateral represented an estimated 163,183 ETH.
The recovery effort has reduced the expected loss. Kelp froze and recovered about 40,373 rsETH, equivalent to approximately 43,168 ETH at the cited rate. The Arbitrum Security Council separately froze 30,766 ETH associated with the attacker.
Liquidations of positions connected to the exploit were expected to return as much as 12,323 WETH to Aave and another 1,845 WETH to Compound. Taken together, the four recovery components could offset approximately 87,955 ETH, leaving a residual gap near 75,000 ETH from the original shortfall exceeding 160,000 ETH.
defi united paired grants with borrowing
Aave DAO and several DeFi participants assembled the recovery framework, known as DeFi United, in late April. The plan drew support from EtherFi, Lido, Ethena, Ink, BGD and Aave founder Stani Kulechov, among others.
Non-repayable contributions totaled around 14,570 ETH. Aave DAO also committed 25,000 ETH from its treasury, a direct use of protocol assets that did not create a future repayment obligation.
Mantle supplied the largest external credit component: a facility of up to 30,000 ETH, available for as long as 36 months. Its interest rate was set at the Lido staking yield plus 1%, tying Aave’s financing cost partly to prevailing Ethereum staking returns.
The recovery design also included roughly 44,787 ETH in short-term bridge funding. That capital was intended to pull frozen or soon-to-be-liquidated assets into the recovery process, rather than increase the final deficit. Once recoveries and liquidations settle, the bridge amount is expected to be unwound.
This leaves the 25,000 ETH treasury deployment and Mantle’s loan facility as the principal long-term demands on Aave’s finances. The treasury contribution immediately reduced available reserves, while any drawn portion of Mantle’s credit line adds interest-bearing obligations.
lower retained income lengthens the estimated payoff period
The protocol collected about $181.2 million in total fees during the 144 days after the incident, according to the financial figures cited in the recovery analysis. Only about $24 million of that amount was retained by the DAO after distributions and other costs.
That retained-income figure was about 41% below the previous 144-day period, when Aave kept around $40.5 million. The difference changes the expected timeline for clearing recovery debt.
Earlier April estimates assumed roughly $266,000 in retained income each day, which would have allowed a 30,000 ETH loan to be repaid in around 10 months. At the later rate of about $167,000 a day, a $79 million facility based on ETH at $2,639 would require around 15.6 months under a static model.
The calculation is a simplified measure rather than a repayment forecast. It assumes that the full facility is used, ETH remains near the reference price and all retained income goes to debt reduction. Aave’s actual timeline would depend on borrowing demand, interest revenue, liquidation activity, operating allocations, the amount ultimately drawn from Mantle and the value of ETH.
lending activity has strengthened despite the recovery burden
Aave’s core markets expanded in August even as the DAO retained cash for recovery purposes. Token Terminal recorded a 13.7% increase in total value locked during the month, bringing the figure to $27.4 billion. Active loans reached $11.7 billion.
The same Token Terminal data showed Aave collecting $33.9 million in fees during August. A particularly volatile trading session on August 6 generated $2.1 million in protocol revenue as liquidations increased.
Higher borrowing and liquidation revenue can accelerate retained income, though elevated liquidation fees are not necessarily a recurring source of cash flow. A more durable improvement would require borrowing activity and interest income to remain strong without depending on sharp market declines.
Aave’s decision to keep repurchases paused therefore places AAVE buybacks behind recovery funding and debt management. Stani Kulechov has also outlined an automated repurchase framework intended to replace the previous discretionary model once the program resumes. Before that structure can operate, the DAO will need to decide how much of its growing fee base can be diverted from recovery obligations without weakening the balance sheet rebuilt after the rsETH episode.
Want deeper DeFi context? Explore crypto and DeFi in 2025 to compare Aave’s recovery with broader ecosystem trends.
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