How a 2.85% Price Error Triggered $27M in Liquidations on Aave

A temporary 2.85% pricing discrepancy in wrapped staked Ether (wstETH) collateral on the Aave lending protocol led to about $27 million in user liquidations on March 10, 2026. The issue was not caused by a faulty external price feed but by a misconfiguration in Aave’s Correlated Assets Price Oracle (CAPO) risk module, which used outdated smart contract parameters that temporarily capped wstETH's value too low (at 1.19 ETH instead of the market rate near 1.23 ETH). This artificial undervaluation pushed collateral ratios below safety thresholds, triggering Aave's automated liquidation bots. While liquidators profited from the event, Aave protocol incurred zero bad debt, and the core risk mechanisms functioned as designed once thresholds were breached. The incident serves as a critical reminder of the vulnerability of DeFi systems to minor configuration errors in oracle infrastructure, prompting proposals for Aave governance to potentially compensate affected users.

(Source：Cointelegraph)