Kelp DAO (rsETH): liquid restaking on EigenLayer, and what the $292M bridge theft exposed

rsETH is the liquid restaking token issued by Kelp DAO: you deposit ETH, stETH or ETHx on Ethereum and get a token that keeps earning staking and restaking rewards while you use it elsewhere in DeFi. On 18 April 2026 that design met its worst day. A forged cross-chain message released 116,500 rsETH, about $292 million at the time, from the contract that backs rsETH on other networks. The theft did not touch the ETH held on Ethereum, but it froze rsETH on Aave, left a hole that a coalition called DeFi United spent five weeks filling, and ended in a lawsuit against LayerZero.

Seven months later Kelp DAO is still the largest protocol in DefiLlama’s liquid restaking category, with $738.7 million of deposits on 12 November 2026 (DefiLlama, read at 19:32 UTC), but that is about 65% below its September 2025 peak. This page explains how rsETH works, who holds the keys, what the KERNEL token gives holders, what the hack exposed and what changed after it, with every figure dated.

What is Kelp DAO? rsETH, Gain and the KernelDAO family

rsETH appeared in late 2023: DefiLlama starts tracking it on 21 December 2023, the month of its first audit reports. It grew fast in 2024, when restaking deposits also earned points that were expected to turn into tokens. DefiLlama shows Kelp’s deposits peaking at $2.094 billion on 18 September 2025.

Today Kelp sits inside a group called KernelDAO, which ran three products under one token, KERNEL. Kelp is the rsETH issuer. Gain offers tokenized yield vaults, hgETH and agETH. Kernel was a shared-security layer on BNB Chain; the team announced its wind-down on 7 March 2026 and retired its app around 8 June 2026, leaving claims to be made directly on BscScan until 8 June 2029. Kelp’s blog said at the time that Kelp and Gain were “not affected”.

The company behind Kelp is Evercrest Technologies, named as the plaintiff in Kelp’s lawsuit against LayerZero. The public face of the project is co-founder Amitej Gajjala, who, according to The Block in 2024, also runs the liquid staking platform Stader Labs with Kelp co-founder Dheeraj Borra. That link explains why Stader’s ETHx is one of rsETH’s accepted assets.

How rsETH works: deposits, the exchange rate and withdrawals

rsETH is minted on Ethereum by the LRTDepositPool contract. The on-chain list of accepted assets, read on 12 November 2026, contains three entries: ETH, Lido’s stETH and Stader’s ETHx. The deposited assets go to node operators that stake them and restake them on EigenLayer, where they secure outside services in exchange for extra rewards, paid partly in EIGEN.

The token does not rebase. Your rsETH balance stays the same and each token becomes worth more ETH as rewards come in. The LRTOracle contract adds up the value of every asset the protocol holds and divides it by the rsETH supply. On 12 November 2026 at 19:23 UTC the oracle gave 1.0844 ETH per rsETH, for a supply of 338,071 rsETH. That rate is accounting, not a market price: on a DEX, rsETH can trade above or below it.

Kelp keeps a cut of the rewards. The LRTConfig contract returned a protocol fee of 500 basis points, or 5% of staking rewards, when read on-chain on 12 November 2026. DefiLlama’s data match that order of size: over the 30 days to 12 November it counts $2.08 million of rewards and fees, of which $104,074 went to the protocol.

Getting out takes two routes, both on Ethereum only, paid in ETH, ETHx or stETH. A standard withdrawal is free but takes 15 to 21 days, according to Kelp’s restaking guide. An instant withdrawal costs 0.5%, the same guide says; it is served from a buffer of liquid funds that the December 2025 upgrade set aside. Holders can also sell rsETH on a DEX, which is quicker but pays the market price rather than the oracle rate.

Several brakes were added in the upgrades of December 2025 and January 2026, each after a 10-day timelock. There is now a daily cap on the rsETH that users can mint and another on rsETH minted as fees. Anyone can push a price update, but only within bounds: the oracle’s price-change limit read 1% on-chain on 12 November, and an update outside the bounds pauses the protocol instead of going through. The January upgrade added a pause-all switch and a 24-hour hold on rsETH transfers per address, which lets the team freeze and recover funds from a compromised address; Kelp’s upgrade log says key partners are exempt. Since then idle ETH waiting for withdrawals can also be supplied to Aave V3 to earn interest.

Who controls Kelp: four Safes and a 10-day timelock

Every authority in the protocol is a Gnosis Safe multisig, according to Kelp’s access-control page. On Ethereum the docs list four, and the thresholds below match what the Safe contracts returned on-chain on 12 November 2026:

• An External Admin Safe, 6-of-11 with external signers, holds the default admin role of the core contracts and the recovery funds.
• An Admin Safe, 3-of-6, owns a second proxy admin.
• A Manager Safe, 3-of-6, runs day-to-day operations, including routine price updates.
• A Pauser Safe, 1-of-5, can only pause; unpausing needs an admin.

Upgrades go through timelocks whose proposers are the admin Safes: 10 days on Ethereum and 3 days on Arbitrum, Base, Linea, Ink and Mantle, where each network has its own 3-of-6 admin Safe. That gives holders time to exit before new code goes live. There are gaps. The timelocks page says the LayerZero owner role on Arbitrum and the owner of the Chainlink CCIP setup are not under a timelock and are “being migrated” to one, with no date. Kelp’s upgrade log also shows that the April 2026 upgrade of the Base pool moved its fee setter from the timelock role to the admin role, so that fee can now change without the 3-day wait. The docs do not name the signers.

A single signer of the Pauser Safe can freeze the protocol, and the same Safe address holds the pauser role on every network listed. That is a deliberate choice for speed in an emergency, and unpausing needs an admin Safe. It cuts both ways, since one key is enough to stop deposits and withdrawals.

The April 2026 rsETH exploit: a forged message and $292 million

rsETH lives on several networks. On Ethereum, a lockbox contract held rsETH backing the copies minted on layer 2 networks; bringing rsETH home meant burning it on the L2, after which a cross-chain message told the lockbox to release the same amount. Kelp used LayerZero for that message on most routes, and its route trusted a single verifier, the LayerZero Labs DVN.

On 18 April 2026 at 17:35 UTC, according to Aave’s incident report, a message on the Unichain-to-Ethereum route announced a burn that had never happened. The lockbox released 116,500 rsETH. Its balance fell from 116,723 to 223 rsETH. LayerZero Labs’ report of 20 May said the attackers had been inside its environment since 6 March, after socially engineering a developer, and on the day poisoned the RPC nodes its DVN read from while knocking a clean provider offline. Citing Mandiant, CrowdStrike and independent researchers, LayerZero attributed the operation to North Korea’s TraderTraitor group, also tracked as UNC4899.

Kelp’s incident post of 19 April stressed what was not hit: “There was no infinite-mint, no protocol exploit,” it said, blaming bridge verification infrastructure run by a third party. The assets backing rsETH minted on Ethereum were intact. What broke was the backing of the rsETH circulating on other networks, since the lockbox that should have held it had been emptied.

Why Aave froze rsETH

The attacker did not sell. They supplied 89,567 rsETH on Aave, worth $221.39 million in the report’s figures, and borrowed 82,650 WETH and 821 wstETH against it. Aave’s Protocol Guardian began freezing rsETH and wrsETH reserves around 19:00 UTC that day, and froze WETH on six markets at about 02:00 UTC on 20 April. The incident report LlamaRisk posted on 20 April put possible bad debt at $123.7 million if losses were spread across all rsETH, or $230.1 million if they fell on L2 rsETH alone. Aave later liquidated the attacker’s remaining positions. Aave’s governance threads give no single settled bad-debt figure, and the estimates in later posts vary.

Who blames whom

Kelp and LayerZero disagree on the root cause. LayerZero says it advised against a single verifier and that Kelp chose a 1-of-1 setup; its chief executive, Bryan Pellegrino, wrote on X, as Cointelegraph reported on 6 May, that rsETH had started on the default configuration and was later switched to one verifier. Kelp says LayerZero staff reviewed and endorsed its setup. On 24 September 2026 Evercrest Technologies filed a notice of civil claim in the Supreme Court of British Columbia against LayerZero Labs Ltd., LayerZero Labs Canada Inc. and Pellegrino himself, alleging negligent misrepresentation, negligence and defamation and seeking aggravated and punitive damages. Pellegrino said on X the claim “continues to be meritless”. No ruling had been reported by 12 November 2026. Our LayerZero page covers the verifier model and LayerZero’s side in detail.

DeFi United, the refill and the move to Chainlink CCIP

The fix was collective. A proposal posted on Aave’s forum on 24 April asked the Aave DAO to commit 25,000 ETH to DeFi United, a recovery fund meant to restore rsETH’s backing. By 8 May, The Block listed 30,000 ETH from Consensys and Joseph Lubin, 30,000 ETH from Mantle as a loan, 5,000 ETH from LayerZero, and 30,765.6 ETH frozen by Arbitrum’s Security Council that Arbitrum DAO voters backed releasing to the fund, with 90.96% in favour. Creditors holding terrorism judgments against North Korea then had the US District Court for the Southern District of New York restrain those funds from 1 May. On 8 May Judge Margaret Garnett allowed a governance vote to move the 30,766 ETH to a wallet controlled by Aave LLC, with Aave bound by the restraint so the creditors’ claim survives the transfer. Who ultimately owns that ETH has not been decided.

Kelp refilled the lockbox in tranches, with 117,132 rsETH to be returned in all, The Block reported on 12 May. The first, 25,000 rsETH on 13 May, allowed bridging to reopen, and Kelp reopened withdrawals the following day. The last, 20,373.7 rsETH, was announced on 25 May: “This closes the operational part of the rsETH recovery plan,” Kelp said, according to Cointelegraph. About five weeks passed between the theft and the end of the recovery.

Then Kelp shrank its footprint. It announced on 5 May that rsETH would move to Chainlink CCIP. On 15 June 2026 it retired the old rsETH bridging on 22 networks, including Optimism, Scroll, zkSync, Blast, Unichain and Monad. On 5 October rsETH on Base, Mantle and Ink switched to CCIP and the old token there was retired; Kelp’s docs, which still list the old contracts on many networks, now show CCIP-based rsETH on Linea, Optimism and Zircuit too. Kelp’s post of 12 October says Arbitrum is the one network where the old rsETH still bridges, and the timelocks page still lists a LayerZero owner role there. Holders of the retired tokens can recover them through a burn-and-claim process that costs 100 USDC per address and network, with a deadline of 15 June 2027 at 23:59 UTC. On six networks two tokens now share the rsETH symbol, and only the contract address tells them apart.

Before that, on 12 May, Kelp said its LayerZero routes now required four independent verifiers instead of one and 64 block confirmations instead of 42, and that all L2-to-L2 routes were closed, The Block reported. In May 2026 Bailsec reviewed the script Kelp uses to check that configuration on-chain; it found five high-severity flaws in the script, all marked resolved in the final report.

Kelp DAO TVL and revenue: what the numbers show

DefiLlama’s count of deposits, read from api.llama.fi on 12 November 2026 at 19:32 UTC, tells the story of the year. These are Kelp’s rsETH deposits only; Kelp’s own figures, which include Gain, are higher.

The protocol makes little money for its size. Over the 30 days to 12 November, DefiLlama counts $2.08 million of fees, mostly staking and restaking rewards that go to rsETH holders, and $104,074 of revenue kept by the protocol. Gain adds management fees of 1.5% on hgETH and 2% on agETH, plus 20% of hgETH’s performance. Kelp’s own first-quarter report, published on 16 April 2026, two days before the theft, put protocol revenue at about $1 million for the quarter. In its lawsuit, Evercrest says users have withdrawn more than $650 million since the exploit, a figure The Block did not verify.

Kelp versus other restaking protocols

The liquid restaking field has thinned out. On DefiLlama on 12 November 2026, Kelp’s $0.74 billion was well above Renzo ($91 million), Swell’s restaking product ($23 million) and Puffer ($20 million), but far below ether.fi‘s staking product ($3.83 billion), which DefiLlama classifies separately. EigenLayer itself, now listed as EigenCloud, held $5.16 billion. Our guide to restaking and liquid restaking tokens explains how these products differ.

rsETH on Aave this month: frozen collateral and a proposal to unwind the loops

rsETH’s biggest user is still Aave, and that is where the November news sits. On 10 November 2026 LlamaRisk, Aave’s risk adviser, posted an ARFC, the discussion stage of Aave governance, to reposition Aave V3 Core around established, liquid collateral. rsETH has been frozen on Core with a loan-to-value of zero since April, and on 9 November it held $661.8 million of collateral backing $605.7 million of WETH debt in its own E-Mode. Supply on Core has fallen 45% since the freeze, from 525,800 to 290,700 rsETH, and eleven positions above $0.2 million hold the remaining debt, the three largest 69% of it.

The proposal does not change rsETH’s settings. It would let wstETH, weETH and cbETH serve in the rsETH E-Mode at the existing 93% loan-to-value, so looped positions can swap collateral rather than repay. LlamaRisk leaves rsETH out of any cut to the liquidation threshold, because positions loop at 12 to 14 times leverage and a cut of 2 to 5 points would make most of that collateral liquidatable at once. Its last resort is to raise the WETH borrow rate on Core by up to 100 basis points, in 50-point steps no more than once a month, with a rebate for WETH borrowers who do not hold the affected collateral. No vote date had been set on 12 November. Our news story on the Aave V3 Core freeze proposal covers the other assets in scope.

KERNEL token: what holders get

There is no Kelp token. In May 2024 Kelp said a KELP token would follow legal and exchange checks; what launched instead, on 14 April 2025, was KERNEL, the governance and utility token of all three KernelDAO products, with 16.23% of supply circulating at launch. Total supply is 1 billion. The January 2025 tokenomics post allocates 55% to community rewards and airdrops (20% airdrops over several seasons, 35% future rewards), 20% to private sales, 20% to the team and advisers, and 5% to ecosystem partners. The team share was locked for six months after launch, then vests over 24 months. CoinGecko’s page showed 288.67 million KERNEL in circulation on 12 November 2026.

KERNEL gives governance votes across Kelp, Kernel and Gain, and staking that was meant to secure Kernel’s shared-security services, now being wound down. Holders do not receive a share of protocol revenue. The tokenomics post put insurance staking and protocol buybacks “on the horizon”, without a mechanism or a date.

Audits and funding

Kelp’s docs list 11 security reviews, from Sigma Prime (report dated 1 December 2023) and a Code4rena contest in November 2023 to Bailsec in May 2026. They found real bugs: MixBytes’ report of 4 March 2024 counts two critical issues, and Sigma Prime’s June 2024 withdrawals review two more. None covered the LayerZero verifier settings that failed in April. Sigma Prime’s November 2024 report concerns an rsETH adapter for a Gain lending pool, not the bridge. Its June 2025 review of upgrades rated one finding high, a stale rsETH price used in core operations, and marked it “closed”: acknowledged by the team, with no change made. Kelp advertises a bug bounty of up to $250,000.

On funding, Kelp announced on 22 May 2024 a $9 million private token sale at a $90 million fully diluted valuation, raised in February and March of that year and led by SCB Limited and Laser Digital, Nomura’s digital-asset arm. Binance Labs backed Kernel, the BNB Chain product, in November 2024, not Kelp itself.

Kelp DAO risks: what can still go wrong

• Bridge risk has not disappeared: rsETH still leaves Ethereum over Chainlink CCIP and, on Arbitrum, the old bridge, and a failure on one route can again leave L2 tokens unbacked.
• The Arbitrum LayerZero owner and the CCIP owner are not yet behind a timelock, and the Base pool’s fee setter no longer waits for one.
• One signer of the 1-of-5 Pauser Safe can stop deposits and withdrawals.
• Leverage sits on top: hundreds of millions of dollars of rsETH remain in looped positions on Aave, which is now discussing ways to push them out.
• Standard withdrawals take 15 to 21 days; selling rsETH faster depends on DEX liquidity and its market price.
• Restaking adds EigenLayer slashing risk on top of ordinary Ethereum staking risk.
• The British Columbia lawsuit and the North Korea creditors’ claim on the 30,766 ETH from Arbitrum are both unresolved.

What to watch next

Three dates and one decision. The Aave community has to decide whether LlamaRisk’s Core proposal goes to a vote, and how hard to push rsETH loops out. Kelp still has to move the Arbitrum LayerZero owner role and the CCIP owner behind a timelock, as its docs say it will. Holders of retired L2 rsETH have until 15 June 2027 to claim. Kernel’s BscScan claim window runs to 8 June 2029.