Kelp DAO Hack Exposes $293M Cross-Chain Bridge Vulnerability in DeFi

Cross-chain bridges are under scrutiny once again—this time, for reasons that highlight severe security flaws in decentralized finance (DeFi). The $293 million exploit of Kelp DAO has thrust bridge security into the spotlight, according to Ari Redbord, global head of policy and government affairs at TRM Labs.

"When the security model of a $300 million issuer reduces to one validator’s signing key, the attack surface stops being technical and becomes structural," Redbord wrote on Sunday.

The attack occurred when an attacker drained 116,500 rsETH—approximately 18% of the token’s circulating supply—by exploiting a function on LayerZero’s cross-chain messaging system. The attacker sent a fraudulent message that falsely indicated funds had arrived on Kelp’s bridge from another blockchain. The bridge, believing the signal, released the tokens.

Kelp DAO is a liquid restaking protocol built on Ethereum, enabling users to earn both standard staking rewards and additional yield through EigenLayer. When users deposit eligible tokens, they receive rsETH, a tradable asset usable across DeFi platforms while the underlying funds secure multiple networks. This structure allows investors to maintain liquidity while generating layered returns.

The Kelp DAO hack follows the $286 million loss suffered by Drift on April 1, bringing total DeFi losses for the month to over $550 million.

How Cross-Chain Bridges Work

A cross-chain bridge is software designed to connect different blockchains, such as Ethereum and Arbitrum. When users transfer tokens across chains, the bridge locks the original tokens and mints equivalent tokens on the new chain. This process relies on validators—trusted computers that verify the authenticity of blockchain transactions.

In Kelp DAO’s case, the bridge was deceived into accepting a fake message from another blockchain as legitimate. Because only one validator was configured to approve these messages, a single point of failure allowed the attacker to unlock hundreds of millions of dollars. Kelp’s system reportedly used a 1/1 Decentralised Verifier Network (DVN), meaning a single validator had sole authority to approve cross-chain messages. Once compromised, the entire system trusted the fraudulent signal.

Wider Impact on DeFi Markets

The "blast radius" of the hack extended beyond Kelp DAO. Protocols such as Aave, SparkLend, Fluid, and Upshift paused markets tied to rsETH, according to Redbord. Aave alone saw over $5.4 billion in ether withdrawals as users sought to limit exposure.

Two additional attempts to drain another $100 million were thwarted after Kelp DAO’s emergency multisignature wallet froze contracts within 46 minutes.

Industry Calls for Stronger Defenses

Redbord emphasized the need for stronger security measures, stating:

"The answer is to lean into defense: diverse validator sets on messaging layers, real-time monitoring on mint and burn flows, fast-acting pauser multisigs, and cross-protocol playbooks that assume contagion."

He added, "April has been a tough month for DeFi builders."