Mantle token holders have supported a proposal to authorize a credit of up to 30,000 Ether (ETH) worth approximately $68 million for the Aave DAO, accelerating the recovery related to bad debt resulting from the April rsETH exploit.
The MIP-34 proposal was adopted in a seven-day snapshot vote that ended on Friday, According to to the Snapshot DAO management platform. This measure authorizes the Mantle Foundation to negotiate and enter into definitive agreements with the Aave DAO for a loan from Mantle Treasury, although the facility is still subject to Aave’s implementation of its recovery plan and finalization of terms by the parties.
The credit is intended to assist address the impact of the rsETH incident on Aave V3. The proposal shows that the attacker deposited 89,567 uncollateralized rsETH on Aave and borrowed approximately $190 million in WETH, wstETH and stablecoins, creating a potential bad debt estimated at between $123.7 million and $230.1 million.
The vote comes as the effects of the rsETH exploit have moved beyond the initial liquidity shock and into a broader recovery phase, with Mantle positioning its treasury as a hedge while Aave works to address bad debt and restore confidence in its credit markets.
Source: Ghost
Aave WETH Market Cools Off After Tightening Following Exploits
The Mantle Credit Facility would address the shortfalls that have also caused liquidity problems in Aave’s credit markets.
Galaxy Research he said Thursday’s report found that the rsETH exploit caused a long-term crash in Aave’s Wrapped Ether (WETH) market, with WETH utilization remaining above 99% for 12.7 days after the incident.
“Over the analysis horizon, WETH utilization remained structurally high and close to the 100% cap, averaging around 99.6%, and only declined to around 98.47% at the end of the snapshot period,” Galaxy said.
Related: Aave asks Arbitrum to send 30,000. ETH from Kelp exploiter to ‘DeFi United’
High utilization means that most of the assets provided have already been borrowed, leaving little free liquidity available for immediate withdrawal. In the case of Aave, Galaxy said the WETH market remains tight as supply declines faster than debt declines, keeping capacity utilization close to full even after the initial shock.
30-day WETH usage chart. source: Aavescan
The market has since recovered from the near 100% level described in the Galaxy analysis. Aavescan data showed Aave’s Ethereum V3 WETH market at about 91.6% utilization on Friday, with about 2.02 million WETH delivered and 1.85 million WETH borrowed.
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