Aave-Linked Capo Oracle Glitch Raises $27 Million in Liquidation
A configuration error in the risk-oracle system used by crypto lending platform Aave led to the withdrawal of nearly $27 million worth of wrapped covered ether (wstETH) positions, prompting the protocol to move to compensate affected users.
In an autopsy released on Tuesday, Ave said the protocol released 10,938 wstETH, which is 2.85% below the live market value of wstETH and after depositing Lido Ether.
The issue stems from a mismatch between price entries and timestamp data, which causes the system to calculate the maximum allowed exchange rate below the actual value on the chain.
Ave said the event did not create any bad debt for the protocol, but liquidators held 499 Ether (ETH) in bonuses and price differentials.
Chaos Risk Oracles is an external tool used in Aave that has performed more than 1,200 loads and 3,000 measurements without issue, said Stany Kulekov, founder and CEO of Aave, in an X-Post on Wednesday.
“The technical misconfiguration caused the depletion of sites that were already close to evacuation,” Kulekov said.
He Aave protocol did not incur any bad debt, and a total of 345 Ether ($700,000) went to liquidators as a surplus liquid windfall.
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Liquids to compensate users Aave
Aave claims to have recovered 141 ETH ($285,000) of liquid bonus earnings in BuilderNet refunds and another 13 ETH in liquid payments. The DAO's treasury funds are used to cover any deficit.
The event will include a broader examination of collateral pricing and term-related risk controls in decentralized financial credit markets. In late February, attackers withdrew around $10 million from a loan pool managed by the YieldBlox DAO, built on a hybrid protocol, through price manipulation.
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Following ACI's exit, Aave's management dispute is intensifying
The liquidation event comes amid tension in the Aave ecosystem following the Ave Chan Initiative's decision earlier this month not to renew its relationship with The DAO.
ACI has cited concerns over admin standards and the voting process. In response to the management controversy, Kulechov, DAOs should reconsider the weight of the vote of token holders with the input of the leaders.
Kulekov argued that token holders should not vote on everything, because the implementation of blockchain protocols could lead to politics or ineffective management efforts, not to groups and leaders, but to thousands of votes.
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