Aave reopens WETH borrowing on six Aave V3 networks

Aave restored wrapped Ether (WETH) loan-to-value ratios to pre-incident levels and reopened borrowing across six Aave V3 networks on Sunday, founder Stani Kulechov wrote on X. The affected networks are Ethereum Core, Ethereum Prime, Arbitrum, Base, Mantle and Linea. Kulechov wrote, “The next step in the rsETH technical recovery plan has been completed with the restoration of WETH LTVs to their pre-incident levels across all affected networks. Users can now once again borrow against WETH on Aave, including through collateral and debt swaps.”

The WETH freeze had been a precautionary safety measure after an exploit that affected rsETH, wrsETH and WETH reserves. A governance proposal passed Saturday allowed the protocol to lift the freeze after recovery measures met Aave’s safety criteria.

The incident began on April 18, when attackers believed to be linked to North Korean state-backed actors stole 116,500 Restaked Ether (rsETH) tokens in a Kelp DAO exploit and used them as collateral on Aave V3 to borrow WETH. The operation produced roughly $195 million in bad debt for the protocol.

Total value locked on Aave fell from about $23.5 billion in March to roughly $14.8 billion as of Monday, based on on-chain data. Deposits of wrapped staked Ether and wrapped Ether declined after the exploit, reducing liquidity for those assets.

Tom Wan, head of data at Entropy Advisors, noted Ether utilization has dropped below 90% and the borrow annual percentage yield is about 1.9%. He added that deposits of wrapped stETH and wrapped Ether have fallen by $1.2 billion and $1.76 billion, respectively. “With wstETH/weETH to ETH loops now back to profitable, the question is whether ETH loop demand returns or if the capital stays on the sidelines/flows to Spark/Morpho,” Wan wrote.

The restoration completes Phase II of the rsETH recovery plan, which included restoring rsETH’s backing using frozen Ether and donated tokens and enabling withdrawals for affected users.

Kelp DAO said it will sunset rsETH bridging on select networks after June 15, including Optimism, HyperEVM, Unichain, Avalanche and MegaETH. After that date, recovering funds will cost 100 USDC per address. Kelp DAO migrated rsETH to Chainlink’s oracle platform and identified LayerZero’s cross-chain infrastructure as the vector used in the attack.

With WETH borrowing reopened on the six Aave V3 networks, users can resume Ether-based borrowing strategies on those chains.