Decentralized lending protocol Aave experienced a temporary oracle malfunction on March 10 that triggered roughly $26 million in unintended liquidations tied to wrapped staked Ether (wstETH) positions. The issue affected both the Ethereum Core and Prime instances and resulted in the liquidation of positions across 34 accounts.
The malfunction stemmed from a configuration mismatch in Aave’s Correlated Asset Price Oracle (CAPO), a safeguard designed to prevent sudden asset price spikes. Chaos Labs said an inconsistency between the oracle’s snapshot ratio and timestamp caused the protocol to report an exchange rate significantly below the actual market level.
The error originated from an offchain operational process that failed to account for an onchain constraint limiting how quickly the snapshot ratio could be updated. As a result, the effective exchange rate used by the protocol fell about 2.85% below the real market rate, triggering liquidations that generated roughly 499 ETH in gains for third-party liquidators. A compensation plan is underway, funded by recovered assets and additional reserves from the Aave DAO treasury, to reimburse affected users.
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