Kelp DAO restored full functionality to its rsETH liquid staking token roughly five weeks after a $293 million exploit drained the protocol in April. The team reopened minting, redemptions, and reward distributions after implementing security fixes and conducting audits.
The April hack exposed vulnerabilities in Kelp's contract logic. Attackers exploited a flaw allowing them to drain liquidity pools and drain the protocol's treasury. The incident forced Kelp to pause operations on rsETH, its flagship restaking derivative built on Eigenlayer infrastructure.
Recovery began with a comprehensive audit from external security firms. Kelp implemented new safeguards targeting the specific attack vectors that enabled the $293 million theft. The team gradually resumed operations, first opening withdrawals to affected users before restoring full minting and redemption capabilities.
rsETH holders can now stake ether through Kelp and receive rewards accrued from validator participation and Eigenlayer operator fees. The token trades below pre-hack levels as market confidence rebuilds. On-chain data shows withdrawal activity normalizing, though total value locked remains depressed compared to peak levels reached before the exploit.
Kelp faces a trust rebuild challenge common to hacked protocols. Users question whether repeated audits and code changes eliminate structural weaknesses. The team's transparent communication and staged recovery approach signal commitment to restoration, but capital flight to competitors like Lido and Rocket Pool continues.
The hack underscores risks in liquid staking derivatives, where multiple layers of smart contract code create compounding vulnerabilities. Kelp's rsETH sits atop Eigenlayer's restaking contracts, adding complexity that security researchers struggle to audit comprehensively. Other liquid staking protocols increased focus on code audits and formal verification following the incident.
Kelp announced a $293 million recovery fund sourced from treasury reserves and ecosystem partners, though full reimbursement faces logistical and legal challenges. The protocol operates under governance controlled by users holding Kelp tokens, who must vote on compensation mechanisms and protocol upgrades.