Mantle has put forward a proposal to lend up to 30,000 ETH to Aave DAO in an effort to help cover losses tied to the Kelp DAO exploit.
Summary
Mantle proposed a 30,000 ETH loan to help Aave deal with bad debt caused by the Kelp DAO incident.
The loan would come from Mantle Treasury funds and would earn yield linked to Lido staking rates.
Aave would secure the deal using revenue and at least $11 million worth of AAVE tokens.
The proposal, called MIP-34, was shared by the Mantle Core Contributor Team. If approved, the ETH would be used specifically to cover rsETH-related bad debt on Aave V3.
The idea is to give Aave extra liquidity while it works through losses from the exploit.
Loan Structure and Terms
Mantle said the loan would be funded directly from its treasury and would generate yield based on the Lido staking APR, plus an added 1% premium. The exact rate would still need final negotiation between both sides.
The loan would run for up to 36 months, with Aave allowed to repay early without penalty.
To secure the loan, Aave would need to lock collateral into a multisig wallet chosen by Mantle. This includes:
A first-priority lien over the wallet
5% of Aave revenue
At least $11 million in AAVE tokens
If Aave defaults, Mantle said the full loan would become immediately due.
Industry Support and Reactions
The proposal has already received backing from Bybit CEO Ben Zhou, who said the industry should stand together in difficult times.
He referenced past support during exchange hacks and said similar cooperation is needed now.
Mantle also said the loan could strengthen long-term ties with Aave and potentially speed up Aave’s expansion on Mantle Network. Any interest earned could be used for treasury growth or even token burns.
What Happened With Kelp DAO
The proposal follows a major exploit on April 18 involving Kelp DAO’s LayerZero-based bridge.
The attacker minted around 116,500 rsETH tokens worth roughly $292 million without authorization.
Those tokens were then used on Aave V3 as collateral to borrow large amounts of ETH and stETH, leaving Aave exposed to bad debt estimated between $124 million and $230 million.
Onchain data later showed the attacker converted much of the stolen ETH into Bitcoin using platforms like THORChain.
Broader DeFi Response
Other DeFi projects are also stepping in to reduce damage.
Lido proposed up to 2,500 stETH, EtherFi Foundation and Aave founder Stani Kulechov each pledged 5,000 ETH, Golem Foundation committed 1,000 ETH, and Frax Finance is preparing its own contribution.
The situation has become a coordinated industry effort, with multiple protocols trying to stabilize Aave and limit the fallout from the exploit.
