Aave Umbrella stakers on mainnet shouldn't cover rsETH losses from Arbitrum

@llamaonthebrink
@llamaonthebrink

It might not be that simple though. According to Aave docs, the junior tranche, aka Umbrella depositors, are supposed to strictly be exposed to the chain they are staking on. That means that an aWETH Umbrella staker on Ethereum mainnet shouldn’t be punished for an unbacked LRT on other chains. The issue is that Aave has no control over how KelpDAO decides to handle the loss. Technically Aave V3 on mainnet is fully collateralized because rsETH on mainnet is fully collateralized. It’s Aave V3 on Arbitrum that technically has bad debt. In a sense I sympathize with the view that the bridged rsETH should bear the brunt of this exploit. Umbrella stakers on mainnet by definition did not sign up to cover losses from another chain. I’m honestly so saddened by this situation. There’s a longtime DeFi user in my DMs who’s suffering as a result of this exploit, and it really breaks my heart💔

Spreek (@spreekaway)

@unhappyben if i understand their claim in my replies, it was more that they were unsure if umbrella would be fully sufficient / necessary. i certainly hope they don't make the decision to not use the junior tranche to cover losses from the senior tranche.

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by mishaderidder.eth13093 🥝 • 6mo • firefly.social
AI summary of the linked article

Aave Umbrella stakers on Ethereum mainnet should not have to cover losses from unbacked rsETH on Arbitrum. Aave docs say the junior tranche, the Umbrella depositors, is meant to be exposed strictly to the chain they stake on, so an aWETH Umbrella staker on mainnet should not be punished for an unbacked LRT on another chain. The text notes that Aave has no control over how KelpDAO decides to handle the loss, and that mainnet Aave V3 is fully collateralized while Aave V3 on Arbitrum technically has bad debt.

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