Key Points
- An oracle configuration error on Aave led to approximately $27 million in liquidations on March 10, 2026.
- The malfunction impacted wstETH, a Lido staking derivative, reporting its value at roughly 2.85% under actual market rates.
- Approximately 34 accounts experienced improper liquidations due to the technical error.
- Liquidation bots earned around 499 ETH from exploiting the mispriced assets.
- Chaos Labs verified that zero bad debt emerged and promised complete compensation for impacted parties.
On March 10, 2026, Aave, a leading decentralized lending protocol, experienced an oracle configuration failure that resulted in approximately $27 million worth of liquidations impacting around 34 accounts. The technical malfunction stemmed from incorrect pricing data for wstETH, Lido’s wrapped staked ether token.
🚨 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 that delivers external market data to blockchain-based protocols. Aave depends on these oracles to monitor collateral values supporting active loans. The system initiates automated liquidations when collateral drops beneath established minimum thresholds.
The root cause traced back to Aave’s Correlated Asset Price Oracle, abbreviated as CAPO. This specialized mechanism exists to limit volatility by restricting how rapidly yield-generating token values can appreciate.
CAPO operates using two key parameters: a snapshot ratio and a corresponding timestamp that together determine the maximum permissible exchange rate. During this incident, these two critical values became desynchronized.
According to Chaos Labs, Aave’s principal risk management partner, an off-chain mechanism attempted to modify the snapshot ratio to approximately 1.2282. The blockchain-level logic, however, constrains this ratio to grow by a maximum of 3% within any three-day window.
The attempted update exceeded this limit, preventing its execution in one transaction. This created a mismatch between the snapshot ratio and its timestamp. The desynchronization forced CAPO to compute a restricted exchange rate near 1.1939, significantly beneath the actual market rate of approximately 1.228.
The oracle effectively undervalued wstETH by about 2.85% compared to genuine market conditions. This artificial devaluation caused multiple borrowing positions to breach their mandatory collateralization ratios.
Impact on Account Holders
The malfunction resulted in the liquidation of roughly 10,938 wstETH spread across 34 individual accounts. Automated liquidation systems and specialized traders capitalized on the mispricing, earning approximately 499 ETH through liquidation incentives and arbitrage opportunities.
Chaos Labs verified that Aave’s protocol balance sheet remained unaffected, with zero bad debt created by the incident. Stani Kulechov, founder and CEO of Aave Labs, stated on X that the event 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 incident originated entirely within Aave’s oracle infrastructure. The wstETH token itself and Lido’s underlying protocol functioned properly during the entire episode.
Reimbursement Initiative
Chaos Labs acted swiftly by implementing emergency measures, including lowering wstETH borrowing limits and manually correcting the snapshot parameters to restore accurate oracle pricing.
A comprehensive compensation framework has been established. Chaos Labs reported recovering 141.5 ETH from the incident and will allocate up to 345 ETH from Aave DAO’s treasury to ensure complete coverage for affected accounts.
“Every affected user will be fully reimbursed,” said Omer Goldberg, CEO of Chaos Labs.
Market data showed wstETH recorded merely $10 million in trading volume during the 24-hour window surrounding the event, indicating limited market-wide exploitation of the pricing discrepancy before correction.
