TLDR
- An oracle pricing error on Aave’s platform led to approximately $27 million worth of liquidations on March 10, 2026.
- wstETH, a staked ether derivative from Lido, was incorrectly priced around 2.85% lower than its actual market value.
- Approximately 34 user positions were wrongfully liquidated due to the technical error.
- Liquidator bots earned roughly 499 ETH exploiting the mispricing incident.
- Chaos Labs has guaranteed complete reimbursement for all impacted users with no bad debt incurred.
A technical malfunction in Aave’s oracle system on March 10, 2026, resulted in approximately $27 million worth of liquidations impacting around 34 user positions. The error stemmed from a configuration problem affecting how the decentralized lending protocol valued wstETH, Lido’s liquid staking derivative token.
Price oracles serve as crucial infrastructure that delivers external market data to blockchain protocols. Aave depends on these data feeds to monitor collateral values supporting active loans. When collateral value drops below predetermined safety margins, the system triggers automatic liquidations to protect the protocol.
The root cause traces back to Aave’s Correlated Asset Price Oracle (CAPO) system. CAPO exists specifically to prevent dramatic price spikes by regulating how quickly yield-generating tokens can appreciate in value.
The CAPO mechanism relies on a snapshot ratio paired with a snapshot timestamp to determine the maximum permissible exchange rate. During this incident, these two critical parameters became desynchronized.
According to Chaos Labs, Aave’s principal risk management partner, an off-chain mechanism attempted to adjust the snapshot ratio to approximately 1.2282. Unfortunately, an on-chain safeguard restricts ratio increases to just 3% within any three-day window.
Since the intended update exceeded this limitation and couldn’t execute in one transaction, the snapshot ratio and its corresponding timestamp became misaligned. This synchronization failure caused CAPO to compute a capped rate near 1.1939, significantly beneath the legitimate market rate of roughly 1.228.
The practical consequence was that wstETH appeared approximately 2.85% undervalued within the protocol. This artificial deflation triggered liquidation thresholds for otherwise healthy borrowing positions.
What Happened to Affected Users
The malfunction resulted in 10,938 wstETH being liquidated across 34 different accounts. Liquidator operators — automated systems or traders who settle undercollateralized loans for discounted assets — captured approximately 499 ETH in liquidation bonuses and arbitrage profits.
Chaos Labs verified that the incident produced zero bad debt for Aave’s protocol. Aave Labs CEO and founder Stani Kulechov stated on X that the event had “no impact to the Aave Protocol.”
A contributor from Lido clarified to CoinDesk that the malfunction wasn’t related to wstETH’s underlying mechanics or the Lido platform, which functioned without interruption during the entire episode.
Compensation Plan
Chaos Labs acted swiftly by lowering wstETH borrowing limits and manually correcting the snapshot parameters to restore accurate oracle pricing.
A comprehensive compensation framework is currently being implemented. Chaos Labs reported recovering 141.5 ETH from the incident and will allocate up to 345 ETH from Aave DAO’s treasury to compensate remaining losses sustained by affected users.
“Every affected user will be fully reimbursed,” said Omer Goldberg, CEO of Chaos Labs.
wstETH recorded only $10 million in trading volume during the relevant 24-hour timeframe, indicating limited opportunity for traders to capitalize on the mispricing before correction.
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