The Mantle network has put forward a draft proposal to extend a substantial credit line to DeFi protocol Aave. The initiative aims to help the leading lending protocol manage substantial uncollectible positions stemming from a recent high-profile security breach involving Kelp DAO’s restaked Ethereum token.
The proposal, outlined by Mantle’s core contributor team, would see the project’s treasury provide up to 30,000 ETH—currently valued at approximately $70–105 million depending on market prices—as a structured loan facility.
This financial support targets the fallout from an April 18 bridge exploit on Kelp DAO’s LayerZero-powered cross-chain infrastructure.
Attackers siphoned roughly 116,500 rsETH tokens, equivalent to about $292 million at the time.
The stolen assets were subsequently deposited as collateral on Aave’s V3 platform, where perpetrators borrowed large sums of wrapped Ether before the underlying collateral lost its backing.
With the rsETH now unbacked, the associated borrowing positions on Aave became effectively impossible to liquidate through standard mechanisms, resulting in an estimated bad debt ranging from $124 million to $230 million.
Aave responded swiftly by freezing the affected rsETH markets to contain further risk, but the incident exposed vulnerabilities in interconnected DeFi protocols and highlighted the need for coordinated industry support.
Mantle’s offer is framed not as an outright grant but as a strategic, yield-generating credit facility.
Under the draft terms discussed in MIP-34, the three-year loan would carry an interest rate benchmarked to Lido’s staking yield plus a modest premium, with the precise figure to be finalized through governance.
Repayment could occur early without penalty, and the arrangement would be secured by AAVE governance tokens along with a portion of the protocol’s future revenue streams.
Proceeds from the facility would be ring-fenced exclusively for addressing the rsETH shortfall, ensuring targeted relief without broader dilution of Aave’s treasury.
This proposal forms part of a growing “DeFi United” coalition, where multiple protocols and foundations—including EtherFi, the Golem Foundation, and even Aave founder Stani Kulechov personally—have pledged additional ETH to restore stability.
Collectively, commitments have surpassed 43,000 ETH, demonstrating a rare display of cross-project solidarity in the wake of the breach.
For Mantle, an Ethereum layer-2 solution with strong connections to Bybit, the move represents a dual opportunity: deploying otherwise idle treasury assets productively while deepening ecosystem partnerships.
By converting dormant capital into a secured, interest-bearing position, Mantle positions itself as both a responsible community member and a savvy financial actor.
The development underscores broader themes in DeFi. That being that the fragility of cross-chain bridges, the cascading effects of collateral failures, and the community’s capacity for rapid, collaborative response.
As governance discussions unfold on the Mantle forum, the proposal could set a precedent for how layer-2 networks and lending platforms collaborate during crises, potentially strengthening overall market resilience.
Industry professionals note that successful implementation would not only mitigate immediate losses for Aave users but also signal confidence in the protocol’s long-term viability. With final approval hinging on community votes and precise bad-debt calculations, the coming days will determine whether this credit facility fully bridges the gap or prompts further coordinated action.