The decentralized lending protocol said it is working with ecosystem partners to protect users and support protocol stability after rsETH-related bad debt emerged.
Aave, a decentralized finance (DeFi) protocol for crypto lending and borrowing, announced a recovery plan to address bad debt tied to rsETH, a liquid restaking token. The statement says the effort is being carried out with ecosystem partners and is aimed at protecting users while stabilizing the protocol. In DeFi lending markets, bad debt typically appears when collateral can no longer fully cover borrowed assets after liquidations or sharp market moves, making recovery plans important for restoring balance and preserving user confidence.