TLDR
- An oracle pricing error on Aave led to approximately $27 million worth of liquidations on March 10, 2026.
- The malfunction impacted wstETH, Lido’s staking derivative, causing the protocol to value it approximately 2.85% under actual market rates.
- Approximately 34 user positions were wrongfully liquidated due to the pricing discrepancy.
- Liquidator bots captured around 499 ETH in rewards from the mispricing incident.
- Chaos Labs has verified no protocol insolvency occurred and pledged complete user compensation.
On March 10, 2026, decentralized finance protocol Aave encountered a significant oracle configuration error that resulted in approximately $27 million in liquidations affecting roughly 34 user positions. The technical failure stemmed from incorrect pricing of wstETH, the liquid staking token issued by the Lido protocol.
🚨 AAVE ORACLE GLITCH TRIGGERS $26M IN WRONGFUL LIQUIDATIONS
A pricing oracle error on Aave caused about $26million in wstETH positions across 34 accounts to be unfairly liquidated after the system reported an incorrect exchange rate, with affected users set to be compensated. pic.twitter.com/qMbsAhQnnl
— Coin Bureau (@coinbureau) March 11, 2026
Price oracles serve as critical infrastructure for blockchain applications, supplying real-time market data that protocols use to monitor collateral values. Aave depends on these oracles to determine when user positions drop below minimum collateralization requirements, triggering automatic liquidation mechanisms.
The malfunction occurred within Aave’s Correlated Asset Price Oracle (CAPO) system. This specialized oracle mechanism is engineered to smooth out volatility by limiting how rapidly the valuation of interest-bearing assets can appreciate.
CAPO operates using a snapshot ratio paired with a timestamp to determine a ceiling for permissible exchange rates. During this incident, these two critical parameters became desynchronized.
According to Chaos Labs, the protocol’s lead risk management partner, an off-chain mechanism attempted to modify the snapshot ratio to roughly 1.2282. Unfortunately, an on-chain safeguard restricts ratio increases to a maximum of 3% per 72-hour period.
Since the adjustment couldn’t be executed atomically, the snapshot ratio and timestamp parameters drifted out of alignment. This desynchronization forced CAPO to compute a restricted exchange rate of approximately 1.1939, significantly beneath the actual market valuation of roughly 1.228.
The net effect was that Aave’s protocol incorrectly valued wstETH at about 2.85% below its genuine worth. This artificial devaluation caused numerous borrowing positions to breach their minimum collateralization requirements.
What Happened to Affected Users
Approximately 10,938 wstETH tokens were liquidated from 34 different user accounts. Liquidation participants — automated systems and opportunistic traders who settle undercollateralized positions for discounted assets — earned roughly 499 ETH in liquidation incentives and arbitrage gains.
Chaos Labs verified that the Aave protocol itself didn’t accumulate any bad debt from this event. Stani Kulechov, founder and CEO of Aave Labs, stated on X that the incident had “no impact to the Aave Protocol.”
TL;DR on the stETH CAPO configuration:
– Chaos Risk Oracles is an external tool used within Aave.
– It has historically processed over 1,200 payloads and 3,000 parameters without issues.
– CAPO is a separate defense mechanism designed to protect against inflation attacks or… https://t.co/LcoThpx7p9
— Stani.eth (@StaniKulechov) March 10, 2026
A representative from Lido clarified to CoinDesk that the problem was entirely unrelated to wstETH functionality or the Lido platform, which maintained normal operations throughout the entire episode.
Compensation Plan
Chaos Labs acted swiftly by implementing emergency wstETH borrowing restrictions and manually recalibrating the snapshot variables to restore accurate oracle pricing.
A reimbursement strategy has been initiated. Chaos Labs reported recovering 141.5 ETH from the incident and plans to allocate up to 345 ETH from Aave DAO reserves to fully compensate affected parties.
“Every affected user will be fully reimbursed,” said Omer Goldberg, CEO of Chaos Labs.
During the 24-hour window, wstETH recorded only $10 million in trading activity, indicating limited opportunity for market participants to capitalize on the pricing anomaly before correction.
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