DefiLlama founder: Three possible scenarios for handling the Kelp security incident, with the worst-case scenario potentially leading to over $300 million in bad debts for Aave.

DefiLlama founder 0xngmi published an article on the X platform calculating potential solutions for the Kelp security incident, proposing three possible paths: first, all users share the loss; second, abandon holders of rsETH on L2; and third, retrospective compensation based on a snapshot before the attack (highly difficult to implement). The calculations show that if the loss is shared among all users of the approximately 666,000 rsETH currently deployed across Aave, and assuming a near 95% liquidation LTV, it would result in an overall loss of approximately 18.5%, with about 13.5% becoming bad debt, corresponding to approximately $216 million. Even with the Umbrella mechanism covering approximately $55 million and the Aave treasury supporting approximately $85 million, there is still a shortfall of approximately $76 million, which would need to be covered through borrowing or selling AAVE tokens (currently $51 million). If Aave chooses to abandon the L2 market, it currently has approximately $359 million in rsETH deposits. Under the same high leverage assumption, this could result in approximately $341 million in bad debts, which would not be covered by Umbrella and would have to be borne by Aave itself, or it could selectively bail out certain markets (such as Arbitrum, Mantle, and Base).