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Aave’s lending protocol experienced an oracle malfunction that resulted in forced liquidations of positions in wstETH tokens totaling nearly $26 million, as reported by the platform’s team. The issue arose within the CAPO (Correlated Asset Price Oracle) mechanism, which is a protective oracle designed to mitigate sharp price fluctuations.
Due to a technical error, the displayed maximum exchange rate for the wstETH/stETH pair was lower than the actual value. Consequently, the effective rate utilized by the protocol decreased by approximately 2.85%. This led to automatic liquidations of positions amounting to around 10,938 wstETH.
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The incident affected a total of 34 accounts, with some users incurring losses. However, certain users gained approximately 382 ETH due to the undervalued rate, while liquidators earned about 116 ETH in bonuses and fees.
The protocol managed to recover 141.5 ETH. Additionally, another 13 ETH was collected in liquidation fees. These funds will be allocated for partial compensation to the affected users, as stated by Aave. The remaining 345 ETH is expected to be covered by the project’s treasury.
“The cause was a temporary discrepancy in parameters due to smart contract limitations. The protocol has now been restored to its original state: the oracle rate has returned to actual values, no bad debts have arisen, and most liquidation bonuses have been returned and will be directed towards compensations,” the platform’s statement noted.
Earlier this year, there were also disputes within the Aave ecosystem regarding platform governance and revenue distribution. Against this backdrop, two key partners of the project announced their intention to leave the company within a few months.
