Aave's report mentions two 'bad debt resolution plans': 1. **Everyone shoulders the burden together plan**: All rsETH holders share the losses, with each rsETH depreciating by about 15%. The total bad debt is approximately $124 million. 2. **Only L2 chains shoulder the burden plan**: Only rsETH holders on L2 chains like Arbitrum, Base, and Mantle bear the losses. rsETH on L2 would depreciate by 73%, and the total bad debt could reach $230 million, but the mainnet (L1) would remain largely unaffected. After reading this, my feeling is that both plans are terrible and detrimental to the long-term development of DeFi and the recovery of confidence: - **Plan 1**: Innocent regular rsETH holders (many of whom are normal staking users) would suffer unnecessary losses. This would severely damage trust in DeFi, as people might feel that "assets can be diluted at any time." It’s also bad for Aave itself unless they’re planning to quit the game entirely. - **Plan 2**: L2 users would face "targeted slaughter," which would erode confidence in Aave's multi-chain deployment. The L2 ecosystem would take a heavy hit, indirectly affecting the entire L2 narrative. Aave's TVL and reputation on L2 would also suffer. **Best solution**: Aave + LayerZero + Kelp DAO pool funds to cover the bad debt, and even other LRT projects and stablecoin issuers could join in to share the burden. Only by doing this can confidence gradually be restored.