Unexpected Error at Decentralized Finance Giant Aave Causes Millions of Dollars to Be Wiped Out! Here Are the Details

Aave, one of the leading lending protocols in the decentralized finance (DeFi) ecosystem, has attracted attention with approximately $27 million in liquidations in the last 24 hours.

According to market observers, these unusual liquidations are due to a temporary price mismatch in the price oracle system used to determine collateral value.

According to data shared by blockchain risk management company Chaos Labs, a significant increase in liquidations has been recorded on the platform in the last 24 hours. Experts suggest that this may be due to a calculation error that occurred specifically during a price update for the wstETH token.

wstETH is a token issued by the liquid staking platform Lido, representing staked Ethereum. Because this asset earns staking rewards over time, it typically trades at a slightly higher value than a single Ethereum. However, at the time of the liquidations, Aave’s risk oracle system valued wstETH at approximately 1.19 $ETH, while the market price was around 1.23 $ETH.

Oracle systems play a critical role as infrastructures that transmit price data from the outside world to blockchain applications. Lending protocols like Aave use this data to determine whether borrowers have sufficient collateral. When the collateral value falls below a certain threshold, positions are automatically liquidated.

Chaos Labs explained that the incident stemmed from a synchronization error related to legacy parameters in the protocol’s CAPO risk oracle configuration. This caused the system to calculate the wstETH value approximately 2.85% lower than it actually was, resulting in some debt positions falling below the safety threshold.

Aave Labs founder Stani Kulechov stated that the incident had no negative impact on the overall operation of the protocol. Chaos Labs also reported that no bad debt was generated in the protocol, and liquidators received approximately 499 $ETH in rewards and profits from the liquidation process. It was also announced that affected users would be fully compensated.

*This is not investment advice.