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Aave suffered an oracle glitch that caused $26 million in liquidations.
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The issue affected 34 accounts holding wstETH positions.
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The error came from a misalignment in oracle configuration parameters.
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A compensation plan funded by recovered ETH and the DAO treasury is underway.
Oracle Error Leads to Unfair Liquidations
Decentralized lending protocol Aave experienced a temporary oracle malfunction that triggered approximately $26 million in liquidations.
The incident occurred on March 10 and affected both Ethereum Core and Prime instances of the platform. The issue impacted 34 user accounts holding wstETH collateral positions.
The glitch originated from the Correlated Asset Price Oracle (CAPO), a risk management system designed to prevent sudden price fluctuations from destabilizing the protocol.
Configuration Mismatch Behind the Incident
According to a post-mortem by risk management provider Chaos Labs, the problem arose due to an inconsistency between the snapshot ratio and snapshot timestamp parameters used by the oracle.
This mismatch caused the oracle to report an artificially lower exchange rate for wstETH. As a result, about 10,938 wstETH worth of positions were incorrectly liquidated.
The incident produced around 499 ETH in profits for liquidators. However, the protocol itself did not incur bad debt.
Aave developers have since corrected the oracle parameters and introduced a compensation plan using recovered funds and treasury reserves.
