Approximately $27.1 million in wrapped staked Ether (wstETH) was liquidated due to a configuration error in Aave's risk-oracle system. The incident, which occurred recently, saw about 10,938 wstETH positions affected after an exchange rate was applied that was 2.85% lower than the actual market rate for wstETH and Lido staked Ether, as detailed in a post-mortem report released on Tuesday.
The misconfiguration arose from a misalignment between a snapshot ratio and timestamp within the Capo risk-oracle setup, leading to incorrect calculations of allowed exchange rates. Despite the significant liquidations, Aave confirmed that the protocol did not incur any bad debt and noted that liquidators gained approximately 499 Ether in bonuses from the pricing discrepancies.
Aave intends to compensate the users affected by the liquidation, utilizing funds recaptured from liquidation bonuses and fees. The DAO treasury will cover any remaining shortfalls. This incident has prompted increased scrutiny regarding collateral pricing and risk controls within decentralized finance lending platforms.