The decentralized finance (DeFi) industry has been severely impacted following a series of platform exploit attacks, with total losses exceeding $500 million in recent weeks, particularly exacerbated by the Kelp DAO incident. Bridge incident accelerated the decline on Saturday.
The total value locked in DeFi has dropped to approximately $82.4 billion, a one-year low, representing a 25% decline from the $110 billion level at the beginning of 2026.
The next day, the Kelp DAO vulnerability, which involved $292 million, caused DeFi to decline by approximately 5.6% in a single day, according to data reviewed by The Block analysts, placing this drop near the 98th percentile of daily declines since 2024.
The most significant losses were in lending markets, where TVL decreased by approximately 13% and liquid staking dropped by about 3.4%. Decentralized exchanges and derivatives protocols also saw declines of 2% to 3%.
The Kelp DAO vulnerability incident further increased the number of similar security breaches, including the Drift Protocol incident at the beginning of this month, which involved losses of approximately $285 million. Several other smaller incidents have also involved such vulnerabilities. In addition to Resolv Labs, Hyperbridge, and Rhea Finance, other factors have contributed to total losses exceeding $600 million within three weeks.
The cryptocurrency security firm Halborn estimated that DeFi attacks resulted in total losses of $86 million in January, $23.5 million in February, and over $27 million in March. The Drift attack was one of them.the largest Solana-based exploit to date.
Kelp DAO update
The Kelp DAO exploit involved attackers manipulating cross-chain messages to steal rsETH from its LayerZero-supported bridge; the stolen assets were then used as collateral on Aave, causing the vulnerability to spread to the lending market.
The attack is believed to be linked to North Korea, according to preliminary findings by the hacker group Lazarus.
Aave responded by freezing rsETH on its platform to limit risk exposure, resulting in reduced liquidity in part of its stablecoin market and effectively locking up billions of dollars in deposits.
Blockchain analytics firm Arkham Intelligence said that Kelp DAO has limited options without raising external funds.
One approach is to distribute the loss among all rsETH holders, resulting in approximately a 16% loss per person.
Another option prioritizes the interests of Ethereum mainnet holders, leaving most of the losses to be borne by layer-2 users. Under this scenario, Arkham estimates that Aave users holding rsETH could face losses of up to approximately $1,000.$267 million.
LayerZero, which supports the exploited bridge, stated in a post on X on Monday that the incident stemmed from Kelp DAO's use of a single-verification setup, calling it a "single point of failure" and reaffirming that other integrations were unaffected.
The incident has strained relations between Kelp DAO, Aave, and LayerZero, with reports of mutual accusations.
Banteg, a core developer of Yearn Finance, wrote on X: "We should bring together LayerZero, Kelp, and Aave for a proper discussion. The situation isn't looking good—everyone has hired lawyers and is engaged in intense PvP battles."