Aave Event Analysis: Users Lose $50 Million Due to Insufficient Liquidity, Protocol Itself Unaffected

Gate News, March 15 — Aave released a post-event analysis report regarding the “Buy AAVE and lose $50 million” incident. On March 12, a user executed a token swap through the CoW Swap router integrated into the Aave interface, attempting to exchange 50,432,688 aEthUSDT (worth approximately $50.43 million) for aEthAAVE. Due to the user’s unusually large order in a market with insufficient liquidity, CoW Swap’s quotes were highly unfavorable, but the user confirmed acceptance of the quote.

Aave emphasizes that the protocol itself was never at risk, as this exchange occurred outside the protocol via a third-party Swap protocol. Currently, the involved user has not contacted the Aave team.

The report states that the key issue in this incident was market illiquidity, not slippage. Illiquidity means the market cannot supply enough assets at a specific price to fulfill large orders, causing significant price deviations. The user’s order far exceeded available market liquidity, and CoW Swap’s quote was 99.9% below the expected market clearing price. The unfavorable outcome resulted from the user confirming the quote, not from price changes during execution.

To prevent similar incidents, Aave will introduce Aave Shield in the Swap widget, which will automatically block exchanges that could cause price impacts exceeding 25%.