Mantle Network has proposed providing Aave DAO with a credit line of up to 30,000 ETH. The funds are intended to help cover bad debt that emerged after the major Kelp DAO exploit, with losses estimated at around $292 million.
Mantle’s initiative is aimed not only at helping Aave deal with the consequences of the incident, but also at making more efficient use of its treasury funds. If approved, the loan would allow Mantle to turn part of its unused treasury assets into an income-generating instrument while strengthening cooperation between Mantle and Aave.
Key Points
- Mantle Network proposed a loan of up to 30,000 ETH to Aave DAO.
- The funds are intended to repay bad debt caused by the Kelp DAO exploit.
- The incident involved the unauthorized minting of 116,500 rsETH worth around $292 million.
- The loan could allow Mantle to turn idle treasury funds into a yield-generating asset.
- Interest income may be directed toward burning Mantle tokens or funding ecosystem development.
Mantle Proposes a Loan to Support Aave DAO
Mantle, an Ethereum Layer 2 network backed by Bybit, submitted a proposal last week to provide Aave DAO with a credit line of up to 30,000 ETH. The goal of the initiative is to help Aave manage the bad debt created after an exploit connected to Kelp DAO’s cross-chain infrastructure and LayerZero.
On Thursday, Mantle’s core contributor team introduced proposal MIP-34. The document outlines a strategic credit line for Aave DAO designed to help the protocol address the aftermath of the rsETH incident.
If the proposal is approved, Mantle Treasury will be able to provide Aave DAO with a loan of up to 30,000 ETH. At the same time, the funds must be used exclusively to repay the bad debt that appeared in Aave V3 as a result of the exploit.
How Mantle Explains the Benefit of the Loan
The proposal emphasizes that the credit line would allow Mantle to use part of its treasury funds more productively. Instead of remaining idle, these assets could be converted into a lending instrument that generates income.
For Mantle, this is also a way to strengthen its relationship with Aave and expand Aave’s presence in the Mantle ecosystem. As a result, the initiative is presented not only as support during a crisis, but also as a strategic step toward deeper cooperation between the two DeFi ecosystems.
The income generated from loan interest is proposed to be used either for burning Mantle tokens or for funding ecosystem development. This mechanism could create additional value for Mantle participants and support long-term network initiatives.
Terms of the Proposed Credit Line
According to MIP-34, the loan’s interest rate would be calculated based on Lido’s annual staking rate plus a 1% premium. The repayment period may extend up to 36 months.
The loan is proposed to be secured through a multisig wallet with a first-priority claim. The collateral requirements inсlude 5% of Aave’s revenue and at least $11 million worth of AAVE tokens.
Early repayment would be allowed without penalties. This gives Aave DAO flexibility: the organization could repay the funds ahead of schedule if its financial position improves or if additional liquidity sources are secured.
Support from Bybit
Bybit CEO Ben Zhou publicly supported Mantle’s proposal. He noted that the crypto industry should come together during difficult periods and help one another, especially when serious security incidents are involved.
Zhou drew a parallel with the situation when Bybit itself faced a hack, emphasizing that in such circumstances, community support is important for restoring trust and market stability.
What Happened to Kelp DAO
Mantle’s proposal came after the exploit of Kelp DAO’s cross-chain bridge, which took place on April 18. As a result of the attack, 116,500 rsETH tokens were minted without authorization, with a total value estimated at around $292 million.
After the incident, the attacker used the obtained funds to create significant bad debt in Aave. Because of this, the protocol was forced to seek support from the broader DeFi community.
Several ecosystem participants are already involved in addressing the issue, including Arbitrum, Lido Labs, and the EtherFi Foundation. Mantle has become one of the parties offering structured financial assistance through a credit line.
Money Laundering and Market Reaction
According to blockchain analysts at EmberCN, the hacker has already laundered around $80 million worth of Ethereum. This has increased attention on cross-chain liquidity routes, non-custodial swap protocols, and mechanisms for monitoring fund movements after major DeFi hacks.
The incident once again showed how vulnerable complex cross-chain systems and related liquid derivatives can be. When an exploit affects major protocols such as Aave, the consequences go beyond a single project and can spread across several ecosystems at once.
Why Mantle’s Proposal Matters for DeFi
Mantle’s credit initiative may become an example of how major DeFi participants can coordinate after serious incidents. Instead of leaving the affected protocol to deal with the problem alone, the ecosystem can offer financial and infrastructure mechanisms to help stabilize the situation.
For Aave, such a loan could help close the bad debt faster and reduce pressure on the protocol. For Mantle, it is an opportunity to strengthen its own role in the DeFi sector, generate income from treasury assets, and deepen its relationship with one of the largest lending protocols in the market.
More broadly, the situation highlights the need to improve risk management mechanisms, audits of cross-chain infrastructure, and liquidity protection in DeFi. The more protocols interact with one another, the more important collective security and crisis readiness become.
Conclusion
Mantle Network has proposed a loan of up to 30,000 ETH to Aave DAO to repay bad debt created after the $292 million Kelp DAO exploit. Proposal MIP-34 includes a credit line with a term of up to 36 months, an interest rate based on Lido’s staking yield plus 1%, and collateral through a multisig structure and Aave assets.
If the initiative is approved, Mantle will be able to turn part of its treasury funds into an income-generating credit asset, while Aave will receive an additional tool to address the consequences of the exploit. Against the backdrop of ongoing attacks on DeFi protocols, such a proposal could become an important example of coordination among major market participants.