LayerZero is facing heavy criticism for its response to the recent $290 million KelpDAO exploit after the omnichain interoperability protocol blamed Kelp’s 1-of-1 verifier configuration for the incident. Related Reading: Bitcoin’s Decentralization Narrative Under Fire After Epstein Files Claims LayerZero Blames KelpDAO For $290M Exploit Over the weekend, liquid restaking protocol KelpDAO was the victim of an attack that drained over $290 million in rsETH from the project after malicious actors exploited a weakness in the protocol’s LayerZero-powered bridge. Two days later, LayerZero addressed the incident, which became the largest DeFi hack of 2026, just weeks after Drift Protocol’s $285 million exploit shocked the industry. LayerZero attributed the “highly sophisticated attack” to North Korea’s Lazarus Group, claiming that it was a crypto infrastructure attack rather than a protocol exploit, and affirming that “there is zero contagion to any other cross-chain assets or applications.” They explained that the protocol is built on a “foundation of modular, application-configurable security,” using Decentralized Verifier Networks (DVNs), independent entities responsible for verifying the integrity of cross-chain messages. The malicious actors allegedly poisoned downstream RPC infrastructure by “compromising a quorum of the RPCs the LayerZero Labs DVN relied upon to verify transactions.” Per the post, the attackers swapped binaries for a custom payload to forge messages and used DDoS attacks to force failover to the poisoned nodes, triggering the DVN into confirming fake transactions. Based on this, LayerZero placed responsibility on KelpDAO for using a 1-of-1 verifier configuration instead of the multi-DVN recommendations: “This incident was isolated entirely to KelpDAO’s rsETH configuration as a direct consequence of their single-DVN setup.” Crypto Community Criticizes ‘Lack Of Accountability’ The crypto community reacted to the post-mortem, sharing its concerns about LayerZero’s response and criticizing the protocol for placing all responsibility only on Kelp’s security setup. “Imagine building a bridge and vehicles pays to cross, the bridge collapsed and you said it’s their fault for crossing the bridge. A classic clownery act from Bunch of clowns with zero accountability,” X user Saint wrote. Others questioned why LayerZero included a “1-of-1” configuration if the purpose of a DVN is customizable/modular security. “If the system allows this option, it’s not the fault of the customer who chose it—it’s a fundamental design flaw by the system that permitted it,” user Ditto wrote. “At the end of the day, the fact remains that the DVN RPC was compromised. DVN is a LayerZero product, and they are the ones who sold it to these teams,” he continued. Similarly, Chainlink community manager Zach Rynes accused the protocol of deflecting responsibility for the compromise of their own DVN node. He also criticized them for “throwing KelpDAO under the bus” for trusting LayerZero Labs’ setup that they “willingly support and only blocked after getting hacked, all while claiming everything worked as designed.” Meanwhile, Yearn Finance core team developer Artem K noted on X that the attack was described as a compromise of an RPC node and RPC poisoning, but that their own infrastructure is what was compromised. “Given it doesn’t say how the breach has occurred, I wouldn’t rush re-enabling the bridges,” he added. Wrong Diagnosis, Wrong Fix? Analyst The Smart Ape also claims that LayerZero made the wrong diagnosis and offered the wrong solution. Notably, the protocol’s post-mortem suggested migrating all applications with 1-of-1 DVN configurations to multi-DVN setups to prevent similar attacks. However, the analyst pointed out that multi-verifiers won’t stop the next multi-million-dollar attack, asserting that they could fail as all DVNs read chain states from the same handful of RPC providers, which are mostly clustered on AWS or GCP. If five “independent” DVNs read from the same three RPC providers, an attacker who poisons those three RPCs will poison all five verifiers simultaneously. “If all your verifiers get fooled in the same way at the same time, the math collapses back to 1-of-1. Five clones are not five witnesses,” he added. Related Reading: Remember Arbitrum? This Analyst Just Predicted That A 7,400% Rally Is Coming To solve this, the analyst suggested that every verifier runs its own full node on different client software, hosted on different cloud providers, maintained by different ops teams, peered with different subsets of the Ethereum network. “The fix isn’t multi-anything. The fix is that verifiers should attest to their own substrate, not just to chain state. until you can audit a DVN’s upstream topology, which RPC providers, which client software, which clouds, which regions, ‘M-of-N secured’ is marketing copy for a property that hasn’t actually been built. Lazarus didn’t break cryptography on April 18. They broke three servers,” he concluded. Featured Image from Unsplash.com, Chart from TradingView.com
The Qivalis consortium is made up of: Banca Sella, BBVA, BNP Paribas, CaixaBank, Danske Bank, DekaBank, DZ BANK, ING, KBC, Raiffeisen Bank International, SEB, and UniCredit.
The US Navy's actions may heighten regional instability, but traders remain skeptical of immediate Gulf State military escalation against Iran.
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Machado's proposal could redefine Venezuela's economic landscape, challenging US sanctions and potentially influencing global crypto adoption.
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The scrutiny of Robbins could intensify leadership challenges for Starmer, impacting political stability and market confidence.
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Rising tensions in Hormuz could destabilize global oil markets, impacting energy prices and geopolitical relations significantly.
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Iran's firm stance against US concessions heightens geopolitical tensions, reducing prospects for a swift diplomatic resolution.
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The IMO's evacuation plan could stabilize regional trade, but hinges on U.S.-Iran cooperation, impacting global shipping dynamics.
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The proof-of-concept trial will test the onchain transfer and management of Japanese government bonds on Canton Network.
The prolonged closure of the Strait of Hormuz could exacerbate global economic vulnerabilities, heightening recession risks worldwide.
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Ethereum (ETH) still appears range-bound on the chart, but the underlying data is starting to diverge in a meaningful way. Over the past week, more than 101,000 ETH has been accumulated, pushing large holdings close to 5 million ETH, while spot ETF inflows have now crossed $12 billion, with consistent capital entering the market. At …
The attack highlights the fragility of ceasefire agreements and could destabilize regional peace efforts, impacting geopolitical dynamics.
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Iran's demand for transparency highlights deep-seated distrust, potentially complicating diplomatic efforts and impacting global oil markets.
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Vance's Islamabad visit could shift market dynamics, influencing US-Iran relations and impacting global oil and geopolitical stability.
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Apple's leadership change amid trade tensions could impact its market position, affecting competition with NVIDIA and supply chain strategies.
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Carlson's regret highlights potential rifts in conservative media, signaling possible shifts in political alliances and media influence.
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BoJ's steady rate amid oil shock suggests prioritizing economic stability over immediate inflation control, impacting future monetary policy.
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The massive AI funding surge, led by OpenAI, strengthens NVIDIA's market dominance but raises concerns over potential regulatory impacts.
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Rising oil prices due to geopolitical tensions could strain global economies, impacting travel costs and influencing energy market dynamics.
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Trade tensions and military movements could strain US-China relations, impacting global markets and diplomatic strategies significantly.
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Geopolitical tensions from the Hormuz blockade could destabilize markets, affecting asset prices and investor sentiment amid uncertain US-Iran relations.
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Pakistan's mediation efforts highlight the fragile nature of US-Iran relations, with potential regional instability if talks fail.
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France's fiscal impact from the Middle East conflict highlights the complex interplay between national budgets and broader ECB monetary policy.
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Geopolitical tensions in the Strait of Hormuz could disrupt global oil trade, potentially driving up oil prices and impacting cryptocurrency markets.
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A $292 million hack tied to restaking protocol Kelp DAO has rippled through decentralized finance (DeFi) lending and market confidence far beyond the original incident, with Aave emerging as one of the hardest-hit examples. Over the weekend, Aave’s native token (AAVE) fell by about 26%, while the protocol also saw a sharp decline in total value locked (TVL) and continued outflows that intensified the downturn. Kelp DAO Hack Sparks Aave Crisis The chain of events began with the attacker draining roughly 116,500 rsETH—valued at about $292 million—from Kelp DAO’s LayerZero bridge. The stolen staking tokens were then used as collateral on Aave V3, enabling the attacker to borrow approximately $236 million in WETH. Because the rsETH later became effectively unbacked, the collateral underpinning those positions is not liquidatable, leaving the borrowed funds stranded within the lending system. As a result, Aave is now facing a $280 million in bad debt that it cannot directly recover. Related Reading: Remember Arbitrum? This Analyst Just Predicted That A 7,400% Rally Is Coming The impact on users and depositors was swift. With Aave’s ETH pool reaching 100% utilization, the protocol essentially has almost no available ETH left for withdrawals. In practical terms, that means users looking to exit quickly may already be confronting liquidity limits at the pool level. As crypto portfolio manager Pratik Kala put it, the fear wasn’t about losses that Aave created itself, but about the protocol carrying a gap it did not make—prompting withdrawals driven by uncertainty. Kala likened the behavior to a bank run, summarizing the dynamic as “withdraw first, ask questions later.” Since Saturday, when the heist news first emerged, Aave has recorded around $9 billion in net outflows. Total value locked on the platform fell by more than a third, dropping to about $17.5 billion. The damage was not confined to Aave. DefiLlama data indicate that across all decentralized lending protocols, TVL fell by roughly $13 billion within 48 hours. Price 86% Below All-Time Highs As markets digested the fallout, Aave’s token performance also reflected the heightened stress. On Monday, AAVE was down about 26% from a one-month high of $118 recorded last Friday, after the broader crypto rally earlier last week. Related Reading: XRP A Strong Buy Before 2027 Despite 27% Drop In 2026: Finance Advisory Firm At the time of writing, AAVE was trading around $88 per token. CoinGecko data further highlights the precariousness of the asset: the cryptocurrency is reportedly about 86% below its all-time high of $661. Aave has responded to the situation by moving to contain further risk. The protocol froze rsETH markets on its platform. On Sunday, Aave said its own analysis indicates that rsETH traded on Ethereum remains fully backed; however, it kept restrictions in place as a precaution. Featured image from OpenArt, chart from TradingView.com
A fake police raid enabled a $1 million Bitcoin robbery, exposing the rise of wrench attacks and the shift from digital hacks to physical crypto threats.
BOK Governor Shin Hyun-song previously took a negative stance on stablecoins during his tenure at the BIS.
Bitmine's strategic Ethereum acquisition amid geopolitical tensions could influence institutional interest and market dynamics significantly.
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The Upbit listing could significantly impact USD.AI's market perception and valuation, especially amid evolving South Korean regulations.
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Rising tensions in the Strait of Hormuz could disrupt global shipping, impacting oil markets and increasing geopolitical instability.
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