DefiLlama founder: Aave faces three bad debt resolution options
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According to a post by DefiLlama founder 0xngmi, following the KelpDAO hack, Aave is facing pressure to handle bad debt, with three possible solutions: First, socializing the losses among users by reducing asset value by 18.5%, which is expected to result in approximately $216 million in bad debt. Umbrella insurance would cover $55 million, and the treasury would supplement $85 million, still leaving a $76 million gap. Second, executing a "rug pull" for rsETH holders on L2, which would generate around $341 million in bad debt. Third, returning assets based on a pre-attack snapshot, which, after umbrella insurance coverage, would still leave about $91 million in losses. Additionally, it is suggested to confiscate the hacker's collateral to offset part of the bad debt. Aave OG Security Module holds around $300 million AAVE tokens, and a 20% haircut could provide about $60 million in coverage.
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