The exploit of the Kelp liquid replenishment protocol shows how non-custodial lending and integration with decentralized finance (DeFi) can cause more broadly infected ecosystems, according to crypto industry executives and blockchain security firms.
According to Michael Egorov, founder of the Curve Finance DeFi protocol, non-isolated lending on DeFi platforms, including earlier versions of the Aave lending protocol, exposes users to risks associated with all the different tokens used as collateral on the platforms.
Kelp was the target of a cyberattack on Saturday, which resulted in the platform pausing astute contracts for its restaking token (rsETH) while it investigated the attack, which wiped out approximately $293 million from the platform.
DeFi teams should also vet potential digital assets to ensure tokens do not contain single points of failure or attack surfaces before approving tokens as loan collateral on their platforms, Egorov said in an email.
He also warned against the utilize of cross-chain bridging architecture to transfer resources from one blockchain protocol to another, which was the root cause of this weekend’s Kelp exploit.
“Cross-chain is difficult and potentially risky. Only use cross-chain infrastructure when absolutely necessary and do so very carefully,” Egorov said.
He said the incident is a learning experience for DeFi that the sector can utilize to develop and implement better cybersecurity defenses, as losses from cryptocurrency hacks, code exploits and fraud reached $482 million in the first quarter of 2026.
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The Kelp exploit causes a “contagion” throughout the DeFi ecosystem
“This wasn’t just a protocol exploit. It immediately became a cross-protocol contagion event,” blockchain security firm Cyvers told Cointelegraph.
The incident impacted at least nine DeFi protocols and platforms, including Aave, Fluid, Compound Finance, SparkLend and Euler, which took action to freeze rsETH markets or mitigate the effects of the Kelp exploit, Cyvers said.
“The challenge is no longer just preventing exploits at the contract level, but understanding how quickly they can cascade between integrated protocols,” Cyvers CEO Deddy Lavid told Cointelegraph.
The Kelp exploit follows the $280 million hack of decentralized exchange Drift Protocol last week and at least 12 other crypto platforms and DeFi hacks earlier this month.
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