Compound Foundation Proposes 3,000 ETH to Aave for rsETH

Compound Foundation has proposed a governance plan offering 3000 ETH to assist Aave in the ongoing rsETH recovery effort under the DeFi United initiative. The proposal includes a potential contribution of up to 3,000 ETH to help restore stability after the recent disruption linked to rsETH. It states in their proposal that while Compound’s direct exposure to the incident is expected to remain limited, the protocol has chosen to participate in the recovery process.

Compound Foundation Proposes 3000 ETH to Aave’s DeFi United

Post the rsETH incident, the Compound Foundation and its service providers began working with other participants in the ecosystem. Their efforts have focused on monitoring developments, assessing risks, and identifying possible solutions. These discussions have involved several counterparties for a coordinated effort.

Initial assessments show  that Compound’s exposure remains manageable under various recovery options. Risk and security partners, such as Gauntlet, have backed this assessment. The Foundation said the situation was still evolving, and the picture at present may shift in the future.

Despite little exposure, the proposal indicates the impact of well-coordinated action in times of market stress. By assisting in the recovery effort, Compound is trying to help sustain stability across the system and minimize broader disruption potential of the incident. This application applies to the Compound DAO to have ETH contribution to be authorized between 1,900 and 3,000 ETH.

At today’s prices they would be between $4.3 million and $6.9 million.The final amount will be decided later, based on market conditions and the structure of the recovery plan.

A designated execution group will determine the exact contribution. This group includes the Compound Governance Working Group, Gauntlet, security service providers, and the Compound Foundation. The decision will depend on several factors. These include the final design of the recovery plan, participation from other contributors, and the remaining shortfall in rsETH backing.

The group will also consider treasury conditions and market risks before finalizing the amount. After a decision is made, the details will be shared publicly along with an explanation of how the conclusion was reached.

The proposal includes strict conditions for releasing funds. One key requirement is that the recovery plan must ensure full backing of rsETH. Another condition focuses on fairness. Funds must be distributed in a neutral and balanced way across affected users and platforms. No group should receive preferential treatment unless required by the technical structure of the plan.

The proposal also requires a clearly defined recovery framework. Sufficient information must be available for governance participants to evaluate how funds will be used. If these conditions are not met, Compound reserves the right to withhold its contribution.

Part of the proposed contribution could come from recovering the attacker’s position. Around 1,857 ETH may be sourced this way if the recovery process succeeds. If that recovery does not materialize, the final contribution will be adjusted accordingly within the approved range.

The proposal makes it clear that approval does not guarantee full deployment of funds. The execution group has the flexibility to contribute a smaller amount if conditions change or if less capital is needed to support the recovery.

Compound’s move is part of a wider effort across the DeFi space. Several major participants including Babylon have joined the DeFi United initiative to address the rsETH shortfall. Consensys and Joseph Lubin have committed up to 30,000 ETH in support, alongside advisory input from Sharplink.

Other contributions have also been announced. Circle is purchasing AAVE tokens to support the ecosystem, while Renzo has deployed more than $10 million from its treasury into Aave markets to maintain liquidity. In addition, Marcelo Ruiz de Olano, co-founder of KPK, has contributed 100 ETH to the initiative.