A crypto user has lost millions during a crypto swap on decentralized finance protocol Aave, with a Maximal Extractable Value or MEV bot also leading the trade to make nearly $10 million.
A recently funded Binance wallet containing $50.4 million USDt (USDT) executed a swap through decentralized exchange aggregator CoW Protocol and the SushiSwap DEX on Thursday, with the aim of converting the entire amount into the Aave ($AAVE) sign.
However, the wallet only received 327 $AAVE tokens worth about $36,000, according to Etherscan.
The result was a near-total loss, as the user paid approximately $154,000 each $AAVEcompared to the market price of approximately $114.
Adding to the loss, a MEV bot performed a ‘sandwich attack’ on the user. MEV bots scan ongoing blockchain transactions and, in this case, focus on the large incoming transactions $AAVE to inflate the price of the token before the order to make a profit.
The bot led the transaction by borrowing $29 million worth of wrapped Ether (ETH) tokens from Morpho to drive up the price. $AAVE prior to the user’s transaction with a purchase on Bancor. It then sold the inflated tokens on SushiSwap for a profit of $9.9 million.
A blockchain transaction showing that aEthUSDT was exchanged to aEthAAVE on March 12. Source: Etherscan
User ignored slip warnings: Aave
Automated market makers, such as SushiSwap, use an automated pricing formula that adjusts the slippage, the target and actual price of a trade, depending on the size of the trading pool and impending trades.
Aave founder Stani Kulechov posted on
“The user acknowledged the alert on their mobile device and proceeded with the trade, accepting the high slippage, which ultimately resulted in receiving only 324 $AAVE in return,” he said.
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CoW DAO said on
“No DEX, DEX aggregator, public liquidity pool or private liquidity pool (or combination thereof) could fulfill this transaction at a reasonable price.”
CoW DAO said such transactions “show that DeFi UX is still not where it needs to be to protect all users,” adding that it would refund all protocol fees associated with the transaction.
Aave’s Kulechov said it sympathized with the user and would try to contact them to refund $600,000 in fees it collected for the transaction.
“The key takeaway is that while DeFi must remain open and permissionless, allowing users to transact freely, there are additional guardrails the industry can build to better protect users.”
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