Aave has reopened borrowing against wrapped ether (WETH) after emergency limits put in place following a major April exploit, marking a step toward normalization for one of DeFi’s most critical collateral assets.
What changed
- Aave restored WETH loan-to-value (LTV) ratios on its V3 deployments across six networks — Ethereum Core, Ethereum Prime, Arbitrum, Base, Mantle and Linea — to their pre-incident settings under the rsETH technical recovery plan. According to Aave governance documents, the restored LTVs are: 80.5% (Ethereum Core), 84% (Ethereum Prime), 80% (Arbitrum), 80% (Base), 80.5% (Mantle) and 80% (Linea).
- WETH now operates as normal across these affected V3 markets.
Why this matters
WETH is a tokenized form of ether widely used across DeFi as collateral for borrowing, leverage and liquidity strategies. In the immediate aftermath of the exploit, Aave set WETH’s LTV to 0% on the affected markets as an emergency containment measure, effectively disabling its use as collateral. Restoring LTVs reopens borrowing capacity, improves liquidity efficiency and frees trapped capital across multiple ecosystems — a clear signal that Aave views the acute systemic risk as largely contained.
The exploit and recovery
The crisis stemmed from an attack on a bridge connected to Kelp DAO’s rsETH, a yield-bearing, restaked-ether token. Attackers minted roughly $292 million in unbacked rsETH and used it as collateral to drain approximately $230 million in ETH from Aave. In total, about 112,103 unbacked rsETH were created in the exploit. Coordinated liquidations and recovery actions have reclaimed roughly 106,993 of those tokens: 89,567 recovered through Aave liquidations and 17,426 via Compound. That leaves an estimated shortfall of about 5,200 rsETH, which the industry coalition DeFi United has committed to covering.
Lingering issues
While restoring WETH collateral capacity is a meaningful market recovery step, legal disputes over frozen assets and questions of ultimate liability remain unresolved. Aave’s move reflects confidence that immediate contagion risk has been reduced, but the broader fallout from the rsETH bridge exploit is still being addressed by the ecosystem.
Bottom line
Reinstating WETH borrowing restores a core DeFi primitive and should ease pressure on leverage and liquidity across affected networks. The recovery progress to date is substantial, but the last-mile remediation and legal wrap-up around the rsETH incident are still underway.
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