A Aave is discussing an unusual mechanism that will allow users to direct the yield from their deposits to charity, while still retaining access to their principal capital.
The proposal appeared on the protocol’s governance forum as a Temp Check. This is a preliminary discussion stage used to gauge the community’s reaction to the idea before a full vote.
For some users, this initiative has also become the first positive signal after one of the most difficult episodes in Aave‘s history, related to the rsETH exploit.
Currently, the total TVL Aave is about $14.62 billion, according to DefiLlama. The native token AAVE was trading around $88 at the time of publication, having lost about 2.8% in the last 24 hours.
What Exactly Is Aave Proposing?
The core of the Aave proposal is a fairly simple idea: a user deposits fiat or cryptocurrency into the protocol’s usual yield infrastructure, and the deposit remains available for withdrawal at any time.
The profit generated by these funds is automatically sent to selected charitable or humanitarian initiatives.
See Also: Zcash Rose Nearly 10% After SEC Investigation Closed
The authors of the idea propose using on-chain mechanics with transparent tracking of fund movements so users can see exactly where the yield is going and how the money is distributed.
According to the developers, this should solve several problems of traditional charity.
Currently, donors usually just give away their own money with no way to recover the capital. In addition, charitable organizations themselves often face unstable funding and weak transparency in spending.
In the Aave model, the user retains control over the principal, and only the yield from the deposited funds is directed to charity.
In fact, the system proposes using DeFi as a permanent source of funding for humanitarian projects instead of one-time donations.
The authors of the proposal believe that blockchain can provide two main advantages here: transparency in fund distribution and a more stable cash flow for the organizations themselves.
If the idea is approved, the model will resemble the approach previously adopted by the Ethereum Foundation. Instead of constantly selling ETH to fund expenses, the foundation has become more active in using staking and yield from assets.
Theoretically, such a system could also be of interest to Vitalik Buterin, who regularly participates in charitable initiatives and supports DeFi projects.
What Happened With the rsETH Exploit?
The discussion of the new mechanism in Aave appeared exactly one month after a major incident with rsETH.
At that time, an attacker exploited a vulnerability in the KelpDAO bridge based on LayerZero and forged a message about a cross-chain transfer. As a result, 116,500 rsETH were withdrawn from the Ethereum bridge without actually burning tokens in the original network.
After that, the attacker deposited about 89,567 unbacked rsETH into Aave as collateral and borrowed about $190 million in ETH and other assets via Ethereum and Arbitrum.
See Also: Pump.fun Generated Over a Third of Solana’s Revenue Despite Meme Coin Slump
The total damage from the attack exceeded $292 million, and TVL Aave fell by more than $11.6 billion after the incident.
To stabilize the situation, several major DeFi market participants had to get involved immediately.
Some protocols and industry representatives joined the DeFi United initiative. They raised more than $300 million as a support fund to restore rsETH and compensate for the consequences of the attack.
Aave Founder Stani Kulechov also participated in the project’s rescue and personally contributed 5,000 ETH to the fund.
Has the Crisis Around Aave Ended?
It seems that the most difficult part of the rsETH story is already behind us.
On May 14, KelpDAO reopened withdrawals of rsETH, bridge operations, and requests via EigenLayer. This was part of the phased recovery after the attack.
And already on May 17, Aave restored standard LTV limits for WETH across several V3 networks, including Ethereum Core, Arbitrum, Base, Mantle and Linea. These restrictions were introduced as an emergency after the exploit to reduce risks for the protocol.
See Also: Tokenized Stocks Rose to $1.5 Billion, Prediction Markets Await RWA Surge
Some of the stolen funds were also brought back under control. We’re talking about approximately $71 million in ETH on the Arbitrum network. According to the community, the assets were transferred to a wallet associated with Aave, after which the funds were burned.
Against this backdrop, the discussion of the charity mechanism no longer looks like just a new idea for the governance forum.
For part of the community, it is rather an attempt to show that Aave is gradually emerging from a mode of constant crisis management and is again trying to move toward developing the protocol itself and new use cases for DeFi.
