Aave, Kelp, LayerZero Ask Arbitrum DAO to Release $71M ETH

Aave, Kelp and LayerZero submitted a governance request to the Arbitrum DAO this week asking the DAO to release about $71 million in ETH currently frozen in an Arbitrum smart contract so rsETH can return to normal operation.

The freeze on the contract halted rsETH redemptions and trading. The request asks the DAO to authorize unlocking the funds to re-enable conversions, restore market liquidity and allow users to redeem rsETH holdings.

The proposal links the three firms to different parts of the ecosystem. Aave uses rsETH as collateral in lending markets. LayerZero cited cross-chain routing and messaging paths that depend on the asset being available. Kelp, a market maker, highlighted immediate liquidity gaps and said access to the underlying ETH is needed to rebuild trading depth.

The $71 million number represents the ETH balance held by the contract that supports rsETH redeemability and peg. Since the freeze, some conversion attempts have failed, decentralized exchanges have limited trading for affected pairs, and some lending positions faced restricted actions to prevent forced liquidations.

If delegates approve the request, the release would follow Arbitrum’s governance process: a formal proposal, a forum discussion period and a token-weighted vote by ARB holders. The signatories proposed that any unlocking include safeguards or conditions to limit risk and ensure the funds are used only to restore rsETH functions. Opposing voices may argue the freeze protects users while teams complete investigations or contain a suspected issue.

Restaked ether tokens such as rsETH represent staked ETH that has been re-used to pursue additional yield. These tokens are used in lending, trading and cross-chain applications; when the backing asset is unavailable, those services can be disrupted.

Arbitrum DAO delegates and community members are expected to discuss the proposal before a vote. The timing for a decision will depend on the governance calendar and any technical or legal reviews the DAO requires.