DeFi protocols move to restore rsETH backing as Aave pauses markets amid growing risk

A major exploit created an rsETH backing shortfall exceeding 100,000 ETH, prompting a coordinated DeFi remediation to contain contagion and protect lending markets. Aave paused rsETH reserve operations across Ethereum, Arbitrum, Base, Mantle and Linea to limit liquidation pressure and prevent undercollateralized positions. Protocols including ether.fi, Lido DAO and Ethena have proposed capital contributions — ether.fi up to 5,000 ETH and Lido DAO up to 2,500 stETH — to a dedicated relief vehicle to restore rsETH’s underlying backing. The intervention marks a shift toward collective, off-chain capital support to avoid bad debt, but the final outcome and broader market impact on ETH liquidity and borrowing conditions remain uncertain.