A Polymarket contract on whether the Kelp DAO will spread the losses from this weekend’s $292 million exploit beyond those directly affected points to a clear answer: probably not.
Bettors give a 14% chance that Kelp will “socialize the losses” or implement a mechanism that forces rsETH holders on Ethereum who were not hit to share the pain of users on other chains.
The attackers drained around 116,500 rsETH from a LayerZero-powered bridge that held the reserves backing the token across more than 20 blockchains. That left parts of the system under collateral, with some holders effectively owning tokens that are no longer fully backed by ether (ETH).
“Socializing the losses” would mean that Kelp redistributed the deficit across all rsETH holders, including those on the Ethereum network, rather than leaving losses concentrated among users and protocols attached to the compromised bridge.
The most widespread precedent for this approach came in 2016, when Bitfinex imposed losses on all users after a $60 million hack, effectively mutual-hitting each other to avoid shutting down.
More recently, derivatives exchanges have used variations of the concept through auto-deleveraging (ADL), where profitable positions are forcibly reduced to cover losses when insurance funds are exhausted.
During the October flash crash, ADL mechanisms were triggered across some venues, shutting out even market-neutral positions and leaving traders exposed. These movements are rare and controversial, but they have been used as a last resort to stabilize systems under stress.
Kelp’s situation is more complex. The exploit drained the reserve support of rsETH across more than 20 chains, leaving losses fragmented across different user groups and platforms.
Holders of affected networks face weakened support, while others remain relatively isolated. Any attempt to offset losses will require cross-chain coordination, a clear accounting of liabilities, and a willingness to impose losses on users who may not see themselves as affected.
This makes a clean, system-wide redistribution both technically and politically difficult, which may explain why Polymarket traders approach the issue with scepticism.
