Yesterday, the rsETH exploit likely caused Aave, DeFi’s leading protocol, to incur over $200 million in bad debt, especially since the hacker has already withdrawn $250 million. The Aave protocol itself isn’t at fault, but the collateral on its platform has a weak link—KelpDAO bears primary responsibility here, though it hardly matters, as they certainly don’t have the funds to cover it. Aave does have Umbrella DeFi insurance to partially offset losses, but the insurance vault’s total capacity is only $80 million, which is clearly insufficient—so users who deposited funds in Aave are likely to suffer some losses. Following Drift’s $200 million exploit, Aave has now been drained of nearly $300 million. DeFi risks are growing substantially, as there are few remaining places on-chain with significant funds left. Be extra cautious when participating in DeFi over the coming period.