Lido Finance to Reimburse Users After Aave CAPO Oracle Misquote

Decentralized liquid staking protocol Lido Finance has recently informed users affected by a platform glitch that it plans to reimburse the losses incurred. In their latest post on X, Lido attributed the unfavorable experience to an incorrect quote by Aave’s CAPO oracle.

No Issues for wstETH and Lido

According to Lido, the Aave CAPO oracle quoted an incorrect wstETHUSD price boundary for AAVE markets. The wrong figures led to several liquidations; the platform claimed that it did not incur bad debts. Lido assured all affected users that it would reimburse them fully for losses resulting from the incident.

In the meantime, Lido clarified that the incorrect price boundaries that triggered the liquidation on its Lido Finance have nothing to do with wstETH as an underlying asset. It further emphasized that the issue has no connection with wstETH or the Lido protocol. Meanwhile, the project assured users of its platform’s safety, stating that Lido Earn products, stRATEGY, and GGV are not affected by the recent liquidations.

What Really Happened?

Before Lido’s statement, Chaos Labs founder Omer Goldberg had posted about the issue, describing it as a misconfiguration on Aave’s CAPO oracle. According to Goldberg, the event triggered E-Mode liquidations, resulting in a loss of 345 $ETH.

Goldberg further explained the technicalities involved, highlighting the Risk Oracle’s functions and its role in securing loans and boosting the efficiency of Aave’s infrastructure. According to Goldberg, Risk Oracles have been free of incidents since it launched over a year ago, despite streaming more than 1,200 payloads for approximately 3,000 parameters.

Meanwhile, the Aave CAPO system aims to prevent a well-known Oracle exploit vector involving artificially inflated exchange rate values and donation attacks. According to Goldberg, the problem was a miscalculation mix-up, preventing CAPO from properly computing and submitting minimum exchange rate and growth rate updates.

Related: VanEck Files for a Lido Staked $ETH ETF, Seeking Regulated Exposure to stETH