Following @aave’s recovery plan announcement and continued progress on restoring rsETH’s backing, we’ve unpaused: — eUSD and USD3 minting and rebalancing — RSR unstaking on eUSD and USD3 Redemptions remained open throughout. ETH+ and bsdETH were never exposed. Thanks for your patience 🤝

The ABC Labs team is monitoring the Kelp DAO exploit carefully. It appears very unlikely that any Reserve DTF holders will be affected. RSR stakers on USD3 and eUSD could end up performing their function of first-loss capital to protect DTF holders in the event that Aave V3 USDC collateral ends up exposed to bad debt. This is seen as unlikely by many, but cannot yet be ruled out. More info: Yesterday, Kelp DAO's LayerZero bridge implementation was exploited, allowing an attacker to withdraw 116,500 rsETH, worth approximately $292 million, from the ETH L1 bridge contract, leaving their bridged rsETH tokens less than 100% collateralized. The attacker deposited rsETH into onchain lending markets, including Aave on mainnet, and borrowed WETH. At the moment, those borrow positions are still collateralized, but the collateral is rsETH. So the question is: will rsETH on mainnet be devalued? If so, it appears it would take a 15.5-18.5% haircut. But the attack was on the bridge, not the base protocol; the rsETH circulating on mainnet are still themselves fully backed by restaked ETH. So Kelp DAO may choose to treat the mainnet rsETH tokens as they usually would, and only subject the bridged token holders to the loss. If rsETH on mainnet is devalued in an effort to socialize the losses across bridged and non-bridged rsETH holders, the collateral the attacker deposited on Aave would lose around 15.5-18.5% of its value, generating bad debt. There are further questions in this scenario around how Aave's backstop capital mechanisms would be deployed and whether losses would make it to lenders. If Aave lenders took losses, this would affect the Aave V3 USDC collateral within USD3 and eUSD. However, our understanding is that the impact would be small, such that RSR overcollateralization would more than cover the loss. According to the Aave spokesperson, rsETH on mainnet is fully backed and will not take a haircut at all. See: xitter.cf/aave/status/2045944827… If their analysis is correct, our understanding is that USD3 and eUSD bear no exposure at all. Out of an abundance of caution, minting and rebalancing of eUSD and USD3, as well as un-staking of RSR from those two RTokens, have been temporarily paused. Redemption remains available to any who wish to redeem, but to receive the benefit of RSR's overcollateralization in the event it is needed, holders would need to continue holding. ETH+ and bsdETH do not contain any rsETH as collateral and are not exposed. Markets may see stress and reduced liquidity as the ecosystem reacts. We will continue to monitor for secondary impacts of the situation.

A milestone for ETH+: @ether_fi’s weETH becomes the first liquid restaking token in the basket. 22% allocation. 4x improvement in execution depth. Yield held steady at 2.61%. ETH+, upgraded. 🔷

The long-awaited Portfolio view is here! 💼 A dedicated page on the Reserve app with a comprehensive overview of your DTF + RSR positions, rewards, active governance, and transaction history Check it out and let us know what you think! → app.reserve.org/portfolio

ICYMI: Community Call next Thursday (01/15) with @nnevvinn and the team Joining info below 👇