Kelp DAO Migrates rsETH to Chainlink After $292 Million Hack as Dispute With LayerZero Intensifies

DeFi protocol Kelp DAO has announced that it will be migrating its staking token, rsETH, to the Chainlink oracle platform, post the $292 million hack it suffered from in April. The protocol continues to place the blame for the attack on LayerZero's cross-chain infrastructure. While LayerZero argued that the hack occurred because of an inadequate setup tied to Kelp's decentralised verifier network (DVN), which relied on a single LayerZero DVN as the only verified path, rather than requiring multiple checks of cross-chain transactions. LayerZero had advised against such a setup. 

LayerZero Responds to Kelp DAO's Allegations

In a post on X citing data from Dune, Kelp DAO said that half of LayerZero users have a single DVN, and the fact that a 1-1 setup is the default and is used by various protocols. Kelp also accused LayerZero of failing to warn the protocol of related security risks associated with this setup. This incident has caused broader ecosystem contagion and impacted the interconnected crypto lending market, making it one of the largest security breaches this year. 

Kelp DAO further added in their post that “Kelp has operated on LayerZero infrastructure since January 2024 and has maintained an open communication channel with the LayerZero team throughout. The question of DVN configuration came up multiple times, and these configurations were confirmed as secure at that time [...] The simple truth: LayerZero blamed their users for an issue that was caused by their own infrastructure failure.”

Following the attack, LayerZero released an incident report which stated that the company will no longer validate or approve cross-chain messages for any app that relies on a single verifier, and that it is in the process of migrating protocols using the setup to a multi-DVN.

The co-founder and CEO of LayerZero also commented on this incident and said that a ‘ton' of Kelp's claims were “just completely untrue”. 

Last month, Security researcher Taylor Manonan claimed that North Korean IT workers have been infiltrating DeFi protocols for the past 7 years. She further added that seven years of DeFi experience on their resumes is not a lie, cause they have built all the critical protocols that run on each of these DeFi platforms. This data revelation came hours after the Drift Protocol disclosed a $280 million (roughly Rs. 2,600 crore) exploit, which also had a DPRK group behind it.