Aave to Roll Out Aave Shield After $50M in User Losses
Decentralized financial protocol Aave said last week it is introducing a new feature to protect against price swings by more than 25% after a user lost $50 million on a trade with its Aave interface.
“We will soon deploy a new feature, Aave Shield, which will provide additional protection for users who use the exchange feature in the Aave interface aave.com,” Aave said in a posthumous statement on Saturday.
Aave says users must manually disable the Aave Shield protection feature to continue high-risk transactions.
The incident occurred on Thursday, when a user went to exchange $50.4 million USDt (USDT) to Aave (AAVE) on the decentralized exchange CoW Swap, but ended up with $36,500 worth of Aave due to liquidity shortages and other infrastructure failures, resulting in a loss of over $50 million.
Part of this loss was the result of a High Extractable Value (MEV) bot that launched a sandwich attack on the user, a gain of nearly $10 million.
User ignored several warning signs.
Aave claims that the user signed the transaction despite several warnings appearing on the platform interface.
This includes alerts about “high price impact” and notices that the route may be reversed due to low liquidity or small order size.
The user also ticked a checkbox that says “I've verified the exchange, 100% value may be lost,” Ave said.
Event shows DeFi still needs work: CoW DAO
Aave and CoW DAO, the group behind CoW Swap, said poor liquidity led to “extreme price impact”, CoW DAO added, and several infrastructure failures also played a role.
CoW DAO's single solver – a third-party service that finds the best way to do business – has been affected by an expired gas limit, denying the best-priced quotes and leaving the user with only the worst option.
A solver with a very cheap price could not enter the transaction on-chain when they had the chance, the CoW DAO said.
Related: Venus Protocol Hit by $3.7M ‘Supply Cap' Attack
CoW DAO said Mempul leak contributed $50 million in value.
“We do not yet have final answers on the above issues,” CoW DAO said, “and is clearly committed to working with Aave and the wider community on them.”
Magazine: What is ‘Network State' and any real life examples? Big questions
