What Does the Proposal to Unfreeze ETH Involve?
A joint proposal to release roughly $71 million in Ether frozen after the Kelp DAO exploit is set to pass, moving a cross-protocol recovery effort closer to restoring part of rsETH’s backing.
More than 90.5% of voting power supported the motion, representing 173.9 million Arbitrum tokens, while 9.4%, or 18.1 million tokens, abstained. Less than 1% voted against the proposal before the voting period’s scheduled close.
The proposal, co-authored by Aave Labs, Kelp DAO, LayerZero, EtherFi and Compound, aims to unfreeze 30,765 ETH that was locked by Arbitrum’s Security Council on April 21. The freeze followed an attack in which approximately 116,500 rsETH was drained, valued between $290 million and $293 million at the time.
The measure concludes the first round of governance voting and moves the process toward a binding onchain decision.
How Does the DeFi United Recovery Plan Work?
The proposal forms part of the broader “DeFi United” recovery effort, which brings together multiple protocols to contain the impact of the exploit. Participants including Mantle, EtherFi Foundation, Golem Foundation, Lido DAO, Ethena, LayerZero, Ink Foundation and Tydro have collectively pledged 43,000 ETH, valued at about $101 million.
Recent steps include the liquidation of the attacker’s remaining rsETH positions across Ethereum and Arbitrum, reducing immediate risk exposure. The next phase involves a governance “temperature check” to assess delegate sentiment before submission as a Constitutional Arbitrum Improvement Proposal.
If approved, the funds will be transferred to a designated recovery address managed through a 3-of-4 multisignature wallet, with signers from Aave Labs, Kelp DAO, Certora and EtherFi.
Investor Takeaway
What Is the Remaining Shortfall for rsETH?
Even if the proposal is approved, rsETH’s backing still faces a shortfall of about 76,127 rsETH, currently valued near $174.5 million. The proposal argues that restoring even part of the collateral base will help limit broader market disruption.
The gap highlights the scale of the exploit and the limits of recovery efforts when losses exceed available reserves and pledged support. It also underscores the reliance on coordinated governance action to manage fallout in decentralized systems.
Further decisions will depend on the outcome of the final onchain vote and the willingness of participating protocols to continue supporting the recovery framework.
Investor Takeaway
What Other Proposals Is Arbitrum Advancing?
Separately, the Arbitrum DAO is close to approving a proposal to allocate 6,000 ETH, valued at about $14 million, from its treasury into a yield-generating portfolio. The allocation was increased from 5,000 ETH following community feedback.
The proposal also includes transferring approximately $150,000 in idle USDC into the same portfolio to improve capital efficiency. More than 99.9% of voting power supported the measure, indicating strong consensus among token holders.
The strategy is expected to generate around 288 ETH in annual returns, based on current yield assumptions. The move reflects a broader trend among DAOs to actively manage treasury assets rather than leaving them idle.
