TLDR
- An oracle configuration error on Aave resulted in approximately $27 million worth of liquidations on March 10, 2026.
- The malfunction impacted wstETH, Lido’s staking derivative, pricing it roughly 2.85% under actual market value.
- Approximately 34 user positions were incorrectly liquidated due to the pricing discrepancy.
- External liquidation bots earned around 499 ETH exploiting the price feed error.
- Chaos Labs has verified no protocol bad debt occurred and committed to complete user compensation.
On March 10, 2026, Aave’s decentralized lending protocol experienced an oracle configuration failure that resulted in approximately $27 million in liquidations impacting roughly 34 user wallets. The technical malfunction stemmed from incorrect pricing of wstETH, Lido’s wrapped staked ether token.
Price oracles function as data bridges, delivering external market information to on-chain protocols. Aave depends on these feeds to monitor collateral values securing active loans. When posted collateral drops beneath mandatory thresholds, automatic liquidation mechanisms activate.
The root cause traced back to Aave’s Correlated Asset Price Oracle (CAPO) system. This mechanism exists to prevent dramatic valuation spikes by constraining how rapidly yield-generating tokens can appreciate in price.
CAPO employs both a snapshot ratio and timestamp to determine maximum permissible exchange rates. During this incident, these two critical parameters became desynchronized.
According to Chaos Labs, Aave’s principal risk management firm, an off-chain procedure attempted updating the snapshot ratio to approximately 1.2282. Unfortunately, protocol rules restrict this ratio to 3% increases per three-day period.
Since the full update couldn’t execute within one transaction, the snapshot ratio and corresponding timestamp became misaligned. This synchronization failure caused CAPO to compute a capped rate near 1.1939, significantly below the legitimate market rate of roughly 1.228.
Essentially, the system incorrectly valued wstETH at approximately 2.85% below its true worth. This artificial devaluation triggered liquidation thresholds for numerous borrowing positions that were actually healthy.
What Happened to Affected Users
Approximately 10,938 wstETH tokens were liquidated spanning 34 separate accounts. External liquidation operators — automated systems or traders who settle underwater positions for discounted collateral rewards — captured approximately 499 ETH in combined bonuses and gains.
Chaos Labs verified that the Aave protocol itself incurred zero bad debt from this incident. Stani Kulechov, founder and CEO of Aave Labs, confirmed via X that the event had “no impact to the Aave Protocol.”
A Lido protocol contributor clarified to CoinDesk that the malfunction bore no relation to wstETH’s underlying mechanics or Lido’s infrastructure, which functioned normally throughout the episode.
Compensation Plan
Chaos Labs acted swiftly by lowering wstETH borrowing limits and manually recalibrating the snapshot values to restore accurate oracle pricing.
A restitution program is currently active. Chaos Labs reported recovering 141.5 ETH from the event and will allocate up to 345 ETH from Aave’s DAO treasury to compensate remaining user losses.
“Every affected user will be fully reimbursed,” said Omer Goldberg, CEO of Chaos Labs.
During the 24-hour window, wstETH registered merely $10 million in trading volume, indicating limited opportunity for traders to capitalize on the pricing anomaly before correction.
