Mantle has proposed lending up to 30,000 ETH to Aave DAO to help address bad debt linked to the Kelp DAO exploit.
Summary
- Mantle proposed a 30,000 ETH loan to help Aave cover bad debt from Kelp’s exploit.
- The loan would use Mantle Treasury funds and carry yield based on Lido staking APR.
- Aave would secure the facility with revenue and at least $11M worth of AAVE tokens.
The proposal, named MIP-34, was published by the Mantle Core Contributor Team on Thursday. The loan would come from the Mantle Treasury and would only be used to resolve rsETH bad debt on Aave V3. If approved, the facility would give Aave extra liquidity as it works through losses caused by the exploit.
Mantle said the loan would also turn idle treasury funds into a yield-generating asset. The team said the plan could support closer work between Mantle and Aave and help speed up Aave’s deployment on Mantle Network.
Loan terms include yield and collateral
The proposal listed an indicative interest rate based on Lido staking APR plus a 1% premium. The final rate would be subject to negotiation between the parties.
The loan would have a maturity of up to 36 months. Aave would be allowed to repay early without a penalty, according to the proposal.
Mantle said the loan would be secured through a multisig wallet chosen by Mantle. The network would hold a first-priority lien and security interest over the wallet.
Aave would also need to place 5% of its revenue and at least $11 million worth of AAVE tokens into the wallet as collateral. If a default occurs, Mantle said the loan would become due and payable immediately.
Bybit backs Mantle proposal
Bybit CEO Ben Zhou said the exchange would support the proposal. Bybit is a major supporter and strategic partner of Mantle Network.
Zhou wrote, “When we got hacked, the industry got together and helped us.” He added, “It is the only right thing that we do the same to [unite] together and walk out from difficult times.”
The Mantle proposal said the loan “demonstrates active treasury management and a proactive stance on industry resilience, reinforcing token holder confidence in Mantle’s long-term stewardship.”
The plan also said interest proceeds could go to the Mantle treasury for MNT token burns or ecosystem funding. That would allow Mantle to link the loan to its own treasury strategy.
Kelp exploit drives wider DeFi response
The proposal follows the April 18 exploit of Kelp DAO’s LayerZero-powered bridge. The breach led to the unauthorized minting of 116,500 rsETH tokens worth about $292 million.
The attack spread to Aave after the exploiter supplied stolen rsETH as collateral on Aave V3. The exploiter then borrowed 82,650 WETH and 821 wstETH, leaving Aave exposed to bad debt.
Aave’s incident review estimated two possible bad debt outcomes of about $124 million or $230 million. Onchain analysts later said the attacker swapped all $175 million in stolen ETH into BTC through THORChain and other venues.
Several DeFi groups have joined relief efforts. Lido proposed up to 2,500 stETH, while EtherFi Foundation and Aave founder Stani Kulechov each pledged 5,000 ETH. Golem Foundation pledged 1,000 ETH, and Frax Finance said it is preparing its own contribution.
