Aave, one of the leading lending protocols in the decentralized finance (DeFi) ecosystem, has turned heads with approximately $27 million in liquidations in the past 24 hours.
According to market observers, these unusual liquidations are due to a temporary price mismatch in the price oracle system used to determine the value of the collateral.
According to data shared by blockchain risk management company Chaos Labs, a significant increase in the number of liquidations has been recorded on the platform over the past 24 hours. Experts suggest that this could be due to a calculation error that occurred specifically during a price update for the wstETH token.
wstETH is a token issued by the liquid staking platform Lido, which represents staked Ethereum. Because this asset earns staking rewards over time, it typically trades at a slightly higher value than a single Ethereum. However, at the time of the liquidations, Aave’s risk oracle system valued wstETH at around 1.19. $ETHwhile the market price was around 1.23 $ETH.
Oracle systems play a crucial role as infrastructure that transmits price data from the outside world to blockchain applications. Lending protocols such as Aave use this data to determine whether borrowers have sufficient collateral. When the value of the collateral falls below a certain threshold, positions are automatically liquidated.
Chaos Labs explained that the incident stemmed from a synchronization error related to outdated parameters in the protocol’s CAPO risk oracle configuration. This caused the system to calculate the wstETH value approximately 2.85% lower than it actually was, causing some debt positions to fall below the safety threshold.
Aave Labs founder Stani Kulechov stated that the incident had no negative impact on the overall functioning of the protocol. Chaos Labs also reported that no bad debts were generated in the protocol, and liquidators received approximately 499 $ETH in rewards and profits from the liquidation process. It was also announced that affected users would be fully compensated.
*This is not investment advice.