The total value locked (TVL) across decentralized finance protocols has tumbled roughly 14% since mid-April, declining from approximately $172 billion to $148 billion. The drop was triggered by a sophisticated bridge exploit targeting KelpDAO on April 18, which has since eroded confidence across the DeFi landscape.
Lending protocols bore the brunt of the exodus, with TVL in that segment plummeting nearly 25%—from around $53 billion to $40 billion. Liquid restaking protocols also saw notable outflows. The persistent capital flight, now extending over five weeks, suggests that the incident prompted a broader withdrawal of marginal capital rather than a localized re-rating of specific protocols. Users who pulled funds after the exploit have largely stayed away, reflecting a sector-wide retreat in risk appetite.
The KelpDAO attack, attributed to North Korea's Lazarus Group, drained approximately $292 million (116,500 rsETH) by compromising off-chain infrastructure. Hackers manipulated internal RPC nodes and overwhelmed external validators to feed false data into the LayerZero bridge’s verification setup. This tricked the destination chain into releasing funds without a genuine burn on the source chain—a stark reminder that as smart contract security improves, off-chain infrastructure becomes an increasingly attractive attack vector.
While the broader crypto market also experienced heightened volatility during this period, the DeFi sector has historically rebounded from similar shocks. The coming weeks will determine whether the current TVL decline is a temporary correction or the start of a prolonged downturn.
