Aave moves to fix CAPO error underpricing wstETH 2.85%

• Lyla Velez
• March 11, 2026
• News
• 0 Comments

Key Points:

• Oracle malfunction caused roughly $26M in unfair wstETH liquidations on Aave.
• About 34 accounts impacted; liquidators earned ~499 ETH; no protocol bad debt.
• Solvency intact; configuration-driven mispricing, not collateral failure; Lido unaffected, contagion limited.

Aave experienced an oracle malfunction on March 10, 2026 that triggered roughly $26 million in unfair liquidations tied to wstETH, as reported by Forklog. The incident affected about 34 accounts, liquidating approximately 10,938 wstETH, with liquidators earning around 499 ETH; the protocol itself did not incur bad debt, the report noted.

Separately, the protocol’s broader solvency was described as intact, with no impact beyond the unfair liquidations, according to Parameter.io’s account of comments from Aave Labs leadership. This distinction matters for risk assessment because the losses arose from configuration and pricing, not a failure of collateral mechanics.

wstETH and the underlying Lido liquid staking system were not implicated in the malfunction; the issue stemmed from valuation reporting rather than the asset’s design, according to MEXC’s summary of a Lido contributor’s remarks. That separation reduces the likelihood of contagion concerns directed at Lido DAO.

Root cause: CAPO snapshot misconfiguration explained

According to Chaos Labs, an internal misconfiguration in Aave’s CAPO (Capped Asset Price Oracle) for yield-bearing assets desynced the on-chain snapshot timestamp from the snapshot ratio. That mismatch underpriced wstETH by about 2.85%, with the exchange rate reported near 1.1939 WETH per wstETH versus a contemporaneous market level around 1.228. The risk team also highlighted immediate mitigations, including manual realignment of parameters and temporary reductions to wstETH borrow caps to stabilize valuations.

“This did not reflect a flaw in the underlying CAPO or offchain risk oracle design, but rather an onchain configuration misalignment under differing onchain update constraints,” said Stani Kulechov, CEO of Aave Labs.

Additional on-chain constraints contributed to the desynchronization, specifically, a governance limit that caps certain parameter updates to about 3% over a three-day interval, as reported by ODaily. When an offchain process attempted a larger adjustment, the on-chain limit blocked it, leaving the snapshot values out of sync until manually corrected.

Compensation plan, recovered funds, and Aave DAO treasury

Recovered funds totaling about 141.5 ETH have been identified to begin reimbursing affected positions, according to CryptoBriefing. Those funds will be directed toward users whose liquidations were caused by the mispricing.

In addition, the Aave DAO treasury has allocated up to 345 ETH toward compensation, and impacted users are expected to be made whole, as reported by The Block. Together with recovered funds and mitigations already enacted, this framework is intended to remediate user harm while preserving the protocol’s financial integrity.