#What is Mantle's Proposal for Aave DAO?
Mantle has initiated a proposal to deploy up to 30,000 ETH from its treasury as a credit facility to Aave DAO. This move aims to provide relief following financial losses that occurred due to the exploit of rsETH.
This loan would be specifically designated to address the shortfall on Aave V3. Mantle's intent is to convert underutilized treasury assets into an income-generating investment while aiding recovery efforts at Aave.
#How Did the Exploit Happen?
The exploit stemmed from a security failure within the rsETH bridge operated by Kelp DAO. Attackers took advantage of a misconfigured verification system, which allowed them to mint more than 116,000 tokens. Unfortunately, a significant portion of these assets was uncollateralized and deposited into Aave, which facilitated borrowing close to $190 million. This created a substantial risk of bad debt for the platform.
#What are the Loan Terms?
Under the proposed arrangement, the loan is expected to carry an interest rate equivalent to the Lido yield plus 1%. The maturity period can go up to 36 months, with the option for early repayment. Additionally, Mantle plans to implement various risk mitigation strategies. These strategies would involve holding collateral in a multisig wallet, ensuring extra support from Aave’s protocol revenue and native tokens, instituting protections against defaults, and allowing for governance inputs through the delegation of AAVE tokens.