Aave liquidated roughly $26 million in wrapped staked Ether (wstETH) positions after a temporary oracle mispricing on March 10. The event exposed how minor oracle configuration errors can cascade through high-leverage decentralized finance (DeFi) lending markets.
The liquidations occurred on Aave’s Ethereum Core and Prime deployments, according to a post-mortem from Chaos Labs, the protocol’s primary risk management provider. The glitch affected about 34 accounts and forced the liquidation of roughly 10,938 wstETH positions in efficiency mode (E-Mode). Third-party liquidators captured approximately 499 Ether in profits from the event.
ChaosLabs
How Did Aave’s CAPO Oracle Misprice wstETH?
The error originated in Aave’s Correlated Asset Price Oracle (CAPO), a mechanism designed to prevent sudden price spikes in correlated assets such as Ether and its liquid staking derivatives. CAPO reported a capped exchange rate of about 1.1939, well below the actual market rate near 1.228 at the time, according to Chaos Labs.
Yet the issue was not a flaw in the oracle’s design itself. Instead, the discrepancy resulted from a mismatch between the snapshot ratio and snapshot timestamp used by the system.
Data from DeFiLlama shows Aave holds more than $10 billion in total value locked (TVL), making it one of the largest lending protocols in DeFi. In that context, even a small pricing deviation can trigger millions of dollars in automated liquidations. How often can a configuration oversight ripple across positions of this scale?
Chaos Labs attributed the incident to an operational misalignment between offchain updates and onchain constraints. The team attempted to update the snapshot ratio to approximately 1.2282, reflecting the exchange rate seven days earlier, but protocol rules limit increases to 3% every three days.
“It was not possible to set it to ~1.2282 in a single update,” the firm wrote in its report.
The mismatch produced a roughly 2.85% drop in the effective exchange rate used by Aave’s liquidation engine. Chaos Labs quickly reduced wstETH borrow caps and manually realigned the oracle parameters to restore accurate pricing. A compensation plan is underway using 141.5 Ether recovered from the incident and up to 345 Ether from the Aave DAO treasury, with governance discussions likely to shape further risk controls.
