Aave has restored WETH loan-to-value ratios across affected V3 markets, allowing users to borrow against wrapped Ether again as the rsETH recovery plan moves into its next stage.
The restoration applies to Aave V3 deployments on Ethereum Core, Ethereum Prime, Arbitrum, Base, Mantle, and Linea. The change re-enables borrowing against WETH collateral, including through collateral and debt swap functions, after emergency limits were introduced during the rsETH recovery process.
The update matters because WETH is one of DeFi’s most important collateral assets. When Aave temporarily reduced WETH loan-to-value settings to zero, users could still keep existing positions, but new borrowing against WETH was restricted to protect the protocol during a sensitive recovery period. Restoring those settings shows Aave is moving closer to normal operations, but it also reminds the market how quickly DeFi risk controls can change during a crisis.
Aave Moves WETH Markets Back Toward Normal
Aave’s restoration of WETH LTVs is a practical recovery step for users who rely on wrapped Ether as collateral.
Loan-to-value, or LTV, is the amount users can borrow against collateral. If a market has an 80% LTV, a user can borrow up to 80% of the collateral’s value before considering other risk limits. When LTV is reduced to zero, that collateral can no longer support new borrowing, even if users still hold the asset inside the protocol.
Aave’s governance proposal said the goal was to restore the WETH base reserve LTV to its pre-April 18 value on each affected V3 deployment that received the precautionary zero-LTV setting. The same proposal noted that liquidation thresholds, liquidation bonuses, reserve factors, and collateral-enabled flags were left unchanged.
That is important because Aave is not simply switching everything back without structure. It is restoring a specific borrowing parameter while leaving other risk settings in place. For users, the most visible result is that WETH can once again be used more normally as borrowing collateral across the affected deployments.
Aave Updates rsETH Recovery Plan, Restores WETH LTVs to Pre-Incident Levels
Aave has restored WETH loan-to-value (LTV) ratios across affected networks, allowing users to once again borrow against WETH, including through collateral and debt swap functions. Aave founder Stani… pic.twitter.com/bum9ZEayyM
— Wu Blockchain (@WuBlockchain) May 17, 2026
Why WETH Was Restricted in the First Place
The WETH restriction was part of a wider rsETH recovery process after the April incident involving Kelp DAO’s liquid staking token ecosystem.
The issue created risk around positions that used rsETH-related assets and borrowing markets. Aave responded by using precautionary controls to reduce potential damage while recovery steps were organized. In DeFi lending, that kind of quick risk response can be necessary because collateral problems can spread through loans, liquidations, and connected markets.
The latest governance and market updates show that attacker-linked positions across Aave V3 Ethereum Core and Arbitrum were addressed through a specifically constructed recovery payload before the WETH restoration step.
This is the part ordinary users need to understand. Aave did not restrict WETH because WETH itself stopped working. WETH remains a wrapped version of ETH used across DeFi, with each token designed to represent ETH in ERC-20 form. The restriction was a risk-control measure tied to the recovery process around rsETH exposure, not a sign that WETH had lost its basic function. Ethereum’s own educational materials explain that WETH is issued when ETH is deposited into a smart contract and burned when users redeem it back for ETH.
The Six-Network Restoration Matters for Aave V3
The restoration covers six Aave V3 deployments, which shows how broad the risk response had been.
Aave V3 operates across multiple networks, and users often move collateral and debt between Ethereum and Layer 2 ecosystems. That multi-chain structure gives DeFi users more flexibility, but it also means risk settings can affect several markets at once. When a major collateral control changes across Ethereum Core, Ethereum Prime, Arbitrum, Base, Mantle, and Linea, the effect reaches a wide part of the Aave lending ecosystem.
Restoring WETH LTVs across those markets improves capital efficiency because users can again borrow against one of the most liquid assets in DeFi. It also brings back collateral and debt swap functions that many advanced users rely on to manage positions without fully exiting the protocol.
This does not mean every risk from the rsETH incident has disappeared. It means one important piece of the recovery plan has been completed. DeFi protocols often recover in phases, and each phase needs to prove that markets can handle normal activity again without creating new stress.
What This Means for Aave Users
For Aave users, the most direct change is that WETH borrowing is available again on the affected V3 networks.
Users who rely on WETH as collateral can now reopen strategies that were limited during the emergency period. That may include borrowing stablecoins, swapping collateral, refinancing debt, or adjusting leverage. For active DeFi users, this is a meaningful return of flexibility because WETH is one of the easiest assets to price, hedge, and move across Ethereum-based markets.
At the same time, users should not treat the restoration as a reason to ignore risk. Lending markets can change quickly when collateral values fall, liquidity thins, or a connected asset faces stress. The rsETH episode showed that even strong protocols need emergency controls when market structure becomes unstable.
The safer approach is to review health factors, liquidation levels, collateral exposure, and network-specific settings before borrowing again. Restored LTVs make positions possible, but they do not make them risk-free.
The Recovery Shows How DeFi Risk Controls Work
The Aave update gives the market a useful example of how modern DeFi protocols handle stress.
Aave did not rely only on price moves to solve the issue. It used governance, emergency risk settings, and recovery transactions to contain exposure before restoring normal borrowing parameters. That process can be frustrating for users during the restriction period, but it is also part of why large DeFi lending protocols can survive complex incidents.
The tradeoff is clear. DeFi users want permissionless access and high capital efficiency, but lending markets also need safeguards when collateral risk changes quickly. Aave’s response shows that decentralized finance is not a static system. Parameters can be adjusted, risk can be isolated, and borrowing rules can be restored after technical recovery steps are completed.
That does not make Aave immune to future incidents. It does show that large DeFi protocols are becoming more operationally mature in how they respond to emergencies.
What Happens Next?
The next thing to watch is whether WETH borrowing activity returns smoothly across the six affected V3 markets.
If users resume borrowing without liquidity stress, the restoration will look like a successful recovery step. If unusual borrowing, liquidation, or collateral movement appears, risk teams may need to adjust settings again. Aave users should also watch for further updates around the remaining rsETH recovery process, because restoration of WETH LTVs does not automatically mean every connected issue is finished.
The broader lesson is that DeFi collateral is only as strong as the systems around it. WETH remains one of the most trusted and liquid assets in Ethereum DeFi, but the rsETH incident showed that connected positions and cross-market exposure can still create temporary restrictions.
For now, Aave has reopened a major part of its lending engine. That is good news for users who depend on WETH collateral, but the recovery should still be followed closely.
FAQ
What did Aave restore?
Aave restored WETH loan-to-value ratios to pre-incident levels across affected Aave V3 deployments, re-enabling borrowing against WETH collateral.
Which Aave V3 networks were affected?
The restoration applies to Ethereum Core, Ethereum Prime, Arbitrum, Base, Mantle, and Linea.
Was WETH itself the problem?
No. WETH remained a wrapped version of ETH used across DeFi. The borrowing restriction was a precautionary Aave risk-control measure tied to the rsETH recovery process.
Disclaimer: This article is for informational purposes only and does not constitute financial, investment, or legal advice. Always conduct your own research before making any investment decisions.
