MIP-34: Strategic Credit Facility for Aave DAO (rsETH Exploit Remediation)

Author: Mantle Core Team Status: Formal Proposal / Ready for Snapshot Vote Target: Mantle Treasury

---

1. Executive Summary

This MIP authorizes Mantle Treasury to lend up to 30,000 ETH to Aave DAO to address the bad debt resulting from the rsETH bridge exploit on April 18, 2026. The loan will be used exclusively for the purpose of remediating the impact of the rsETH incident on Aave V3. In return, Mantle Treasury will receive a yield with terms structured to align incentives and generate a positive risk-adjusted return on unallocated treasury assets.

The aforementioned authorization is conditioned upon the implementation of the recovery execution plan by Aave in all material respects, and the negotiation and execution of the definitive agreements to the satisfaction of the Mantle team.

---

2. Background & Rationale

On April 18, 2026, a security breach targeting Kelp DAO's rsETH token bridge resulted in the unauthorized minting of 116,500 rsETH (approximately $292M at the time of exploit). The attacker exploited a configuration vulnerability in Kelp's LayerZero bridge setup — specifically, a 1-of-1 DVN (Decentralized Verifier Network) that allowed a single verifier to approve cross-chain messages without proper validation.

The attacker then deposited 89,567 rsETH of the stolen, unbacked tokens as collateral on Aave V3 and borrowed legitimate assets (WETH, wstETH, and stablecoins) valued at approximately $190M.

According to the LlamaRisk report published following the incident, the potential bad debt to Aave is estimated between $123.7M and $230.1M, depending on how losses are socialized across the protocol. Aave DAO service providers are currently leading an effort with ecosystem participants to address this shortfall and have already secured several indicative commitments from various parties.

---

3. Proposal Details

3.1 Loan Structure

The loan shall be governed by the following parameters (subject to the negotiation of and entry into the definitive agreement to the satisfaction of the Mantle team):

• Principal Amount: < 30,000 ETH
• Borrower: Aave DAO (via Aave Labs or designated entity)
• Interest Rate: LIDO + 1% APR, or other terms as negotiated and finalized by the execution team
• Maturity Date: Up to 36 months
• Early Repayment: Permitted without penalty at Borrower's discretion

3.2 Use of Proceeds

Proceeds shall be used exclusively for the purpose of addressing the impact of the rsETH incident on Aave V3.

3.3 Risk Mitigation Framework

Consistent with guidance outlined in Mantle governance documents, the following protections shall apply:

• Collateralization: All ETH under the loan shall be distributed to a multisig wallet designated by Mantle, over which Mantle has a first priority lien and security interest. Aave will also allocate an additional amount including 5% of Aave protocol revenue and Aave tokens with a fair market value of no less than $11 million to the designated wallet or to a multisig SAFE as collateral for the loan. Mantle shall hold a key to the wallet or SAFE.
• Customary Events of Default: The loan is immediately due and payable if there is an event of default, including failure to pay, insolvency of the borrower, breach of the terms of the loan, etc.
• Other Protection Mechanisms: Mantle will be delegated 130,000 Aave tokens to participate in the governance and voting of the Aave community.

---

4. Benefits to Mantle Community

• Financial Return: Converts a portion of unallocated treasury assets (currently earning baseline yield) to a fixed-income instrument with premium crisis-era pricing. The interest generated may be directed to future MNT burn initiatives or ecosystem development.
• Strategic Positioning: Establishes Mantle as a first-response liquidity provider for major DeFi protocols during stress events. This reputation enhances Mantle Network's value proposition for institutional partners and prospective deployers.
• Ecosystem Growth: Accelerates Aave's native deployment on Mantle Network, driving TVL and user activity to Mantle L2. Aave's presence serves as an anchor protocol for the broader Mantle DeFi ecosystem.
• Community Confidence: Demonstrates active treasury management and a proactive stance on industry resilience, reinforcing token holder confidence in Mantle's long-term stewardship.

---

5. Snapshot Vote Parameters

Parameter	Value
Voting Period	7 days
Quorum	100,000,000 MNT
Approval Threshold	Simple Majority
Options	For / Against / Abstain

---

6. Execution

Upon passage, Mantle Foundation is authorized to negotiate and execute definitive agreements with Aave DAO consistent with the terms above.

---

7. Call to Action

Vote FOR to approve a loan of up to 30,000 ETH to Aave DAO at LIDO + 1% APR, 36-month term, with collateral and governance protections as discussed above — subject to the implementation of the recovery plan by Aave DAO.