Aave has reinstated borrowing capacity for wrapped ether (WETH) across multiple networks, rolling back emergency measures introduced after April’s exploit as systemic risk concerns begin to fade.
The decentralized lending protocol restored WETH loan-to-value (LTV) ratios across six major chains, reversing restrictions imposed after an attack involving Kelp DAO’s rsETH token. In that incident, attackers minted roughly $292 million in unbacked assets and used them as collateral to extract about $230 million in ether from Aave.
WETH, a tokenized form of ether widely used across DeFi, plays a critical role as collateral for borrowing, leverage, and liquidity strategies. At the height of the crisis, Aave reduced WETH’s LTV to 0% across affected markets, effectively disabling its use as collateral in an effort to contain contagion.
With conditions stabilizing, the protocol has now restored LTV ratios to pre-incident levels. These include 80.5% on Ethereum Core, 84% on Ethereum Prime, 80% on Arbitrum, Base, and Linea, and 80.5% on Mantle, according to governance updates.
The exploit resulted in the creation of approximately 112,103 unbacked rsETH. Of that amount, roughly 106,993 has since been recovered through liquidations and coordinated recovery efforts — including 89,567 via Aave and 17,426 via Compound. A remaining shortfall of around 5,200 rsETH is expected to be covered by the industry group DeFi United.
The restoration of borrowing limits marks a key step toward normalization. As one of the most widely used collateral assets in decentralized finance, WETH underpins a significant portion of market liquidity and leverage. Its temporary removal constrained capital efficiency and disrupted activity across multiple ecosystems.
By reopening WETH as collateral, Aave is signaling confidence that immediate systemic risks have been largely contained. However, unresolved legal questions surrounding frozen funds and liability continue to linger in the aftermath of the exploit.
