A Polymarket contract on whether Kelp DAO will spread losses from the weekend’s $292 million exploit beyond those directly affected indicates a clear answer: probably not.
Punters give a 14% chance that Kelp will “socialize losses” or implement a mechanism forcing rsETH holders on Ethereum, which was not affected, to share the pain of users on other chains.
The attackers drained approximately 116,500 rsETH from a LayerZero-powered bridge that held the reserves backing the token across more than 20 blockchains. This has left parts of the system under-collateralized, with some holders effectively owning tokens that are no longer fully backed by ether (ETH).
“Socializing losses” would mean that Kelp redistributes the deficit among all rsETH holders, including those on the Ethereum mainnet, rather than leaving losses concentrated among users and protocols linked to the compromised bridge.
The most widely cited precedent for this approach dates back to 2016, when Bitfinex imposed losses on all users after a $60 million hack, pooling the hit to avoid shutdown.
More recently, derivatives exchanges have used variations of the concept through automatic deleveraging (ADL), in which profitable positions are forcibly reduced to cover losses when insurance funds are exhausted.
During the October flash crash, ADL mechanisms were triggered on some venues, closing out even market-neutral positions and exposing traders. These measures are rare and controversial, but have been used as a last resort to stabilize systems under stress.
Kelp’s situation is more complex. The exploit emptied the pool backing rsETH on over 20 chains, leaving losses fragmented across different user groups and platforms.
Affected network holders face weakened support, while others remain relatively isolated. Any attempt to equalize losses would require coordination across chains, clear accounting of responsibilities, and a willingness to impose losses on users who may not see themselves as affected.
This makes net system-wide redistribution difficult both technically and politically, which may explain why Polymarket traders approach the issue with skepticism.
