Aave suffers $6B TVL drop after Kelp hack

Aave experienced a significant drop in total value locked (TVL), losing approximately $6.6 billion, following an exploit on the Kelp DeFi protocol. Attackers utilized stolen rsETH from Kelp's bridge as collateral on Aave V3, leading to roughly $196 million in bad debt within the Aave protocol. This event caused the AAVE token to fall 16%, highlighting systemic risks associated with liquid restaking tokens across decentralized finance. The incident raises concerns about the adequacy of Aave's reserves and the potential for stkAAVE holders to absorb losses, underscoring the interconnected fragility of the DeFi ecosystem.