Cardano founder Charles Hoskinson used his latest livestream to argue that the roughly $292 million KelpDAO exploit was not just another bridge failure, but a broader warning about how Ethereum’s buyback, cross-chain messaging, and lending stack can turn a single compromise into a system-wide contagion.
According to Hoskinson, the April 18 attack exposed what he sees as the most fragile part of modern DeFi: not necessarily the application-level smart contracts, but the verification layers and interdependencies that exist between protocols. He said the exploit, which involved approximately 116,500 rsETH drained from KelpDAO’s Ethereum escrow, should force a broader conversation in the industry about bridge trust assumptions, verifier design and the speed at which bad collateral can spread across lending markets.
Cardano Founder Warns of Dangerous Flaw at the Heart of Ethereum DeFi
Rather than providing a standard post-mortem, Hoskinson said he took internal incident report material and used AI to turn it into a website that explained to viewers the mechanics of the exploit. This structure articulated his broader view: the failure, as he described it, did not begin with broken contract calculations within KelpDAO itself, nor with an obvious accounting flaw at LayerZero. Instead, he said it centered around a fake cross-chain message that was accepted as legitimate and allowed funds to be released on Ethereum.
“So it wasn’t a smart contract issue with Kelp and it wasn’t a smart contract issue with LayerZero, but it was cross-chain message forgery,” Hoskinson said. “So it was something new and different.”
The Cardano founder has repeatedly returned to one design choice in particular: the reported use of a single checker setup. In his explanation, best practice would be a multi-verifier model such as three by five, but KelpDAO’s setup relied on a single active DVN. This, he argued, created an unacceptable single point of failure in a system already composed of staking wrappers, re-staking protocols, bridges and lending venues.
“The failure is in the verification logic, not the enforcement logic,” he said. “Kelp has done everything right from its contracts. They are audited. They work well. The application works well. This is the bridge configuration.”
Hoskinson also pointed out that the industry still doesn’t know exactly where the responsibility lies.
According to its summary, three separate root cause analyzes emerged after the exploit: one from LayerZero, one from KelpDAO, and one related to governance discussions from LlamaRisk and Aave, but none fully agreed. This leaves open the question of whether the break occurred in the messaging layer, the checker configuration, the KelpDAO acceptance logic, or in the joints between them.
What made the event particularly significant, in his opinion, was not only the flight itself but also what happened afterwards. Instead of dumping the stolen rsETH on decentralized exchanges, the attacker allegedly used it as collateral on lending markets to borrow more liquid assets. This turned an exploit into a balance sheet problem for other protocols, leaving behind what Hoskinson described as a poisoned guarantee.
He called this dynamic the real novelty of the incident. “This wasn’t just a bridge hack. It spread to lending, which then created bad debt contagion within those lending protocols. It created a bank run and we saw $13 billion of TVL removed in a very short period of time for a $290 million hack.”
The Cardano founder said DeFi’s broader liquidity shock reaches far beyond KelpDAO itself. Citing public reports referenced in his guide, he highlighted at least nine directly affected protocols and said Aave alone had losses of between $6.6 billion and $8.45 billion, while rsETH traded in a volatile range between around $1,600 and $2,500 in the 24 hours following the attack.
He also raised the possibility of Lazarus’ involvement, although he acknowledged that the attribution was not confirmed. “There is a lot of evidence here that there are links to Lazarus,” he said, before adding that no independent forensic company had definitively proven this.
At press time, Cardano (ADA) was trading at $0.2504.
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