A new governance discussion from Mantle has brought fresh momentum to efforts to stabilize decentralized finance after one of the largest exploits of the year. The draft proposal, known as MIP-34, outlines a plan to extend up to 30,000 ETH in credit to Aave DAO, with funds dedicated solely to addressing bad debt tied to the rsETH incident.

The proposal emerged days after a breach linked to Kelp DAO triggered a cascade across DeFi markets. On April 18, attackers exploited a configuration weakness in a LayerZero bridge setup, which relied on a 1-of-1 verifier system. That flaw enabled the unauthorized minting of 116,500 rsETH, valued at about $292 million at the time.

A large portion of those tokens entered Aave V3 as collateral. The attacker used 89,567 rsETH to borrow roughly $190 million in legitimate assets, including ETH derivatives and stablecoins. This activity left Aave exposed to substantial bad debt, with internal estimates ranging from about $123.7 million to $230.1 million depending on how losses are distributed.

Credit facility structure and safeguards

Mantle’s draft frames the loan as a strategic credit facility rather than a bailout. The proposed terms include an interest rate set at Lido staking yield plus a 1% premium, with a maturity period of up to 36 months. Early repayment would remain an option without penalty.

The structure places emphasis on risk controls. The loan would be secured through a multisignature wallet under Mantle oversight, with a first-priority lien attached. Additional collateral would include 5% of Aave protocol revenue and at least $11 million in Aave tokens.

The Mantle Core Contributor Team wrote,

"This demonstrates active treasury management and a proactive stance on industry resilience, reinforcing token holder confidence in Mantle’s long-term stewardship."

The proposal also outlines governance participation as part of the agreement. Mantle would receive delegated voting power through 130,000 Aave tokens, which would allow it to take part in protocol decisions during the loan period.

Industry response builds around “DeFi United”

The proposal does not stand alone. A broader coalition of DeFi participants has begun coordinating support through an initiative informally referred to as “DeFi United.” Contributions have already been pledged by several major ecosystem players.

Stani Kulechov committed 5,000 ETH personally to the effort. The EtherFi Foundation matched that amount, while Golem Foundation contributed 1,000 ETH. Parallel discussions have taken place across other protocols, including Frax Finance and Lido, which proposed allocating up to 2,500 staked ETH to reduce the shortfall.

Coordination has extended beyond funding. The Arbitrum Security Council froze 30,766 ETH linked to the attacker on Arbitrum One, a move that limited further asset movement tied to the exploit.

Meanwhile, the attacker’s onchain activity has continued to draw scrutiny. Analysts reported that roughly $175 million worth of stolen ETH has already been converted into bitcoin through cross-chain liquidity venues, complicating recovery prospects.

Technical failure exposes bridge risk

Details of the exploit have focused attention on bridge security. LayerZero confirmed that the attacker manipulated the system by targeting RPC nodes and triggering a scenario in which the verifier accepted a fraudulent cross-chain message.

The reliance on a single verifier created a critical point of failure. Once the malicious message received approval, the system processed it as legitimate, allowing the minting of unbacked rsETH.

Aave stated that its protocol functioned as designed during the incident. The risk originated from the acceptance of compromised collateral rather than a flaw in its lending logic. Still, the scale of the exposure has placed pressure on its liquidity framework.

Strategic implications for Mantle

Mantle’s proposal highlights a dual objective: crisis response and treasury optimization. The plan would convert idle assets into a yield-generating position while strengthening ties with one of DeFi’s largest lending platforms.

The Mantle Network, which maintains close ties with Bybit, has positioned itself as a potential liquidity backstop during market stress. Bybit CEO Ben Zhou expressed support for the initiative, writing,

"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 outcome now depends on community feedback. The proposal remains in a pre-vote discussion phase, with token holders asked to evaluate the risk-return profile and provide input on final terms.

A test for coordinated DeFi recovery

The rsETH exploit has exposed structural vulnerabilities in cross-chain infrastructure and collateral design. It has also triggered one of the most coordinated responses seen in DeFi to date.

Mantle’s proposal sits at the center of that response. Its scale, structure, and timing reflect a shift toward more formalized financial mechanisms within decentralized governance. Whether the plan moves forward will depend on community consensus, but the broader effort has already reshaped how protocols respond to systemic shocks.

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