TLDR
- An oracle system malfunction on Aave resulted in approximately $27 million worth of liquidations on March 10, 2026.
- The technical error impacted wstETH pricing, undervaluing Lido’s staking token by roughly 2.85% compared to actual market rates.
- Approximately 34 user positions were incorrectly liquidated due to the pricing discrepancy.
- External liquidators earned around 499 ETH in profits by executing these liquidations.
- Chaos Labs has verified that no protocol bad debt occurred and announced complete user reimbursement.
On March 10, 2026, decentralized finance platform Aave experienced an oracle system malfunction that resulted in approximately $27 million in liquidations impacting roughly 34 user positions. The malfunction stemmed from a technical glitch in how the protocol calculated the price of 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 data feeds that deliver external market information to blockchain-based protocols. Aave depends on these oracles to monitor collateral values backing user loans. When collateral drops beneath minimum requirements, the system triggers automatic liquidation procedures.
The malfunction traced back to Aave’s Correlated Asset Price Oracle system, abbreviated as CAPO. This mechanism was developed to prevent abrupt valuation spikes by limiting how quickly yield-generating token values can rise.
CAPO operates using a snapshot ratio paired with a snapshot timestamp to determine maximum permissible exchange rates. 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 adjust the snapshot ratio to roughly 1.2282. Unfortunately, an on-chain protocol constraint restricts ratio increases to just 3% within any three-day window.
Since the adjustment couldn’t be executed in one transaction, the snapshot ratio and its corresponding timestamp became misaligned. This synchronization failure caused CAPO to determine a restricted exchange rate of approximately 1.1939, significantly beneath the actual market rate of about 1.228.
Essentially, the platform undervalued wstETH by approximately 2.85% relative to its true market worth. This discrepancy caused numerous borrowing positions to fall below their mandatory health factor thresholds.
What Happened to Affected Users
Approximately 10,938 wstETH tokens were liquidated from 34 different accounts. External liquidator bots and traders—who settle undercollateralized loans in return for discounted collateral assets—captured roughly 499 ETH in incentives and gains.
Chaos Labs verified that the Aave protocol avoided accumulating any bad debt from this incident. Stani Kulechov, founder and CEO of Aave Labs, stated on X that there was “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 informed CoinDesk that the incident was entirely unrelated to wstETH’s underlying mechanics or the Lido protocol itself, which functioned normally during the entire episode.
Compensation Plan
Chaos Labs acted swiftly by lowering wstETH borrowing limits and manually correcting the snapshot parameters to restore accurate oracle pricing.
A reimbursement initiative is currently in progress. Chaos Labs reported recovering 141.5 ETH from the situation and will allocate up to 345 ETH from Aave DAO’s treasury to fully compensate impacted users.
“Every affected user will be fully reimbursed,” stated Omer Goldberg, CEO of Chaos Labs.
Throughout the 24-hour period, wstETH recorded only $10 million in total trading volume, indicating minimal exploitation of the pricing anomaly before correction.
